GSTAT Upholds Anti-Profiteering Demand of Rs. 19.32 Lakh on Distributor for Not Passing GST Rate Cut

A complaint was filed alleging that Shree Sai Kripa Marketing, a distributor of “Park Avenue Good Morning After-Shave Lotion 50 ml”, failed to pass on the benefit of GST rate reduction from 28% to 18% w.e.f. 15.11.2017. The DGAP investigated the period from 15.11.2017 to 31.03.2019 and concluded that the respondent had increased base prices post-rate reduction, resulting in profiteering. The erstwhile National Anti-Profiteering Authority (NAA) initially determined higher profiteering amounts, but the Delhi High Court set aside the order on the ground of factual errors (duplication of invoices) and remanded the matter for fresh adjudication.

DGAP revised the profiteered amount to Rs. 19,32,446. With the constitution of the GST Appellate Tribunal (Anti-Profiteering), the matter was finally adjudicated by GSTAT.

Main Issue: Whether Shree Sai Kripa Marketing had profiteered by not passing on the benefit of the GST rate reduction under Section 171 of the CGST Act, and whether the DGAP’s methodology and proceedings were legally sustainable.

ITAT’s Ruling: The GSTAT held that Section 171 of the CGST Act is a valid and enforceable provision and does not fail for want of a prescribed mathematical formula. Relying on Reckitt Benckiser India Pvt. Ltd., the Tribunal held that anti-profiteering provisions are beneficial legislation and timelines under the Rules are directory, not mandatory.

The Tribunal accepted the revised DGAP computation and found that the respondent had profiteered Rs. 19,32,446 by keeping prices unchanged despite the GST rate cut. The respondent was directed to deposit the profiteered amount, without interest or penalty, equally into the Central and State Consumer Welfare Funds, as the affected consumers were unidentifiable.

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