M/s Johnson & Johnson Pvt Ltd held Guilty of Profiteering [Read Order]

Chartered Accountant Johnson & Johnson - Taxscan

The DGAP in a complaint against M/s Johnson & Johnson Pvt Ltd held them liable of profiteering directing them to reduce his prices commensurately.

The Respondent has been alleged of not passing on the benefit of reduction in the rate of GST on the products being supplied by him when the rate of GST on the products being supplied by him when the rate of GST was reduced from 28% to 18% w.e.f. 15.11.2017.

The Respondent submitted a number of contentions majorly pointing at computation anomalies on the part of DGAP, some of which are as follows:

  1. That in the absence of any guidelines to computer and pass on the benefit of GST rate reduction by way of commensurate reduction in prices, he discharged his statutory obligation through various methods.
  2. He also submitted that the DGAP’s investigation has not been initiated in compliance with Rule 128 of the CGST Rules and was without jurisdiction as in the present case, there was no complaint/written application on the basis of which the present proceedings have been initiated, the present proceedings have been initiated on the basis of a suo moto reference.
  3. Further, the prices at which the products were sold to a distributor depended on which product channel it was a part of and hence was priced differently.
  4. He contended that the DGAP had considered a post rate reduction period of approximately 65 days, whereas, in the present investigation, the period post the rate reduction has been taken as 411 days and hence different approached adopted by DGAP were ex facie
  5. Also, that the DGAP’s finding of profiteering with respect to stock transfers no monetary consideration was paid by the recipients as they were merely different offices/depots/warehouses of the Respondent and hence, there was no question of passing any benefits since such transactions were undertaken merely to facilitate the supply of products across the country.

The Quorum constituting of B.N. Sharma, J.C. Chauhan and Amand Shah directed the Respondent to reduce his prices commensurately and to deposit an amount of Rs 2,30,40,74,132 in the Consumer Welfare Fund since the recipients are not identifiable. The Authority ruled on a number of grounds, some of which being:

  1. The Authority has been granted the power to ‘determine’ ‘Methodology and Procedure’ for a determination whether the benefit of rate reduction or of ITC has been passed on by a registered person to the recipient. Also, the Authority is to ‘determine’ and not ‘prescribe’ the method of computation.
  2. To the argument of having a different pricing strategy, it has been submitted that the benefit has ultimately to be passed on to the consumer and the price charged to the consumer does not matter.
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