GSTAT Upholds DGAP Finding of Profiteering by CG Foods on Instant Noodles

The proceedings arose from an anti-profiteering investigation initiated against M/s C.G. Foods following a complaint alleging non-passing of GST rate reduction benefits on instant noodles falling under HSN 1902. The GST rate on such goods was reduced from 18% to 12% with effect from 15.11.2017 under Notification No. 41/2017–Central Tax (Rate). The Director General of Anti-Profiteering (DGAP) conducted an investigation covering the period from 15.11.2017 to 31.12.2018.

C.G. Foods claimed that price increases were because of higher input, packaging, fuel and freight costs, and that MRPs were kept unchanged due to market competition. However, despite a GST rate reduction, it increased the base prices of several SKUs, effectively neutralising the tax benefit to consumers. The DGAP determined total profiteering of Rs.90,90,310 across multiple States.

Main Issue: Whether C.G. Foods contravened Section 171 of the CGST Act, 2017, by increasing base prices after the GST rate reduction and thereby failing to pass on the commensurate benefit to consumers.

GSTAT Ruled: The GST Appellate Tribunal upheld the DGAP’s findings and confirmed profiteering of Rs. 90,90,310 for the period from 15.11.2017 to 31.12.2018. The Tribunal held that although the respondent produced evidence of rising costs, such increases largely related to periods prior to the GST rate reduction and did not justify the contemporaneous increase in base prices. The statutory presumption of profiteering under Section 171 remained unrebutted.

The Tribunal directed the respondent to deposit the profiteered amount into the Consumer Welfare Fund of the Centre and the States in equal proportion. However, no interest or penalty was imposed, as the relevant provisions for the levy of interest and penalty were introduced after the period under investigation. The appeal was disposed of accordingly.

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