In a recent decision by a Division Bench of the Delhi High Court, directed the petitioner, L’Oréal India Pvt. Ltd. to deposit the principal profiteered amount after deducting the Goods and Services Tax (GST) imposed on the net profiteered amount.
The petitioner challenged the notice and order passed by the National Anti-profiteering Authority (NAA) along with the contention that Section 171 of the Central CGST Act, Chapter XV of the CGST Rules, more particularly, Rules 126, 127 & 133 of the CGST Rules as unconstitutional, ultra vires and violative of Articles 14, 19(1)(g), 265 & 300A of the Constitution of India.
It was also contended by the petitioner that the order issued under Section 171 of the CGST Act was not valid for initiation of proceedings as no suo motu powers were conferred.
Additionally, the counsel for the petitioner stated that even though in some products they have not been able to grant commensurate reduction in prices, yet they have tried to pass on the benefit by way of increase in grammage of the product. He also stated that petitioner has given post sale discount (Ex.GST) to the tune of Rs.73.59 crores, and therefore, this amount should be reduced from the total profiteered sum.
On the contrary, the counsel for NAA contended that Section 171 of GST confers powers of wide amplitude to the Authority, pointing out that Section 172(2) read with Clause 9 of the methodology and procedure states “(9) The Authority may inquire into any alleged contravention of the provisions of Section 171 of the Central Goods & Services Tax Act, 2017 on its own motion”.
The counsel for NAA further stated that He stated that Section 171 which is an anti-profiteering measure, must be seen from the perspective of every consumer who receives the supply of goods or services. He further submitted that the object of the Act is to ensure that the sacrifices made by Governments by forgoing their share of taxes from the public exchequer, must reach every consumer on every supply and not selectively. It was also argued by the counsel for the NAA that a taxing statute may not only have provisions for taxation but also other goals. In this case, the customer who bears the burden of the indirect tax, directly benefits by way of commensurate reduction in the prices of the product, and is able to enjoy the extra cash in its hand. The court upheld this argument, approving the public interest aspect of the provisions.
Regarding the suo motu powers, the bench comprising Justice Manmohan and Justice Dinesh Kumar Sharma observed that the NAA is conferred with powers to inquire on its own motion.
The reduction of rate of some of the products/goods do not amount to a commensurate reduction in prices as required under Section 171 of the CGST Act. Extra grammage given to customers without increasing the rates was also dismissed as unqualified as the statute had clearly directed to reduce rates and not increase grammage.
Upholding the order of NAA, the Division Bench directed the petitioner to deposit the principal profiteered amount after deducting the GST imposed on the net profiteered amount (which has already been deposited by the petitioner with the Department) in six equated installments and stayed the interest amount directed to be paid by the respondents as well as the penalty proceedings and further investigation by NAA in respect of other products sold by the petitioner, till further orders.
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