GSTAT Principal Bench Holds Anti-Profiteering Proceedings Valid Despite Rule Omission; Confirms Rs. 13.61 Crore Profiteering Liability Without Interest or Penalty

Background and Proceedings
The case arose from a complaint alleging that the respondent, a retailer, failed to pass on the benefit of GST rate reduction on FMCG products from 28% to 18% effective 15.11.2017. The Directorate General of Anti-Profiteering (DGAP) investigated and found that the respondent had increased base prices post-rate reduction, resulting in net higher realization and profiteering of Rs. 13,61,51,254/- during 15.11.2017 to 31.01.2018. The National Anti-Profiteering Authority (NAA) initially ordered refund and further investigation, which led to the present proceedings before the GST Appellate Tribunal (GSTAT) after jurisdiction was transferred by government notification.

Jurisdiction and Rule Omission
The respondent challenged the jurisdiction of the NAA and GSTAT, arguing that the omission of Rules 122, 124, 125, 134, and 137 by Notification No. 24/2022-CT without a savings clause rendered the proceedings non-est. The Tribunal rejected this contention, holding that the omission of rules did not extinguish pending proceedings or orders already passed. The Tribunal reasoned that the change was only in the authority, not in the legislative intent to address profiteering, and principles of succession applied. The Tribunal further clarified that the powers to direct further investigation under Rule 133(4) and (5) were wide and not restricted to the original complaint, as affirmed by the Delhi High Court in Reckitt Benckiser.

Limitation and Procedural Issues
The respondent argued that the proceedings were barred by limitation, citing the six-month period in Rule 133(1). The Tribunal, relying on the Delhi High Court’s decision in Reckitt Benckiser, held that the time limits in the rules are directory, not mandatory, and that anti-profiteering provisions are beneficial legislation warranting liberal construction in favor of consumers.

Interest and Penalty
The Tribunal accepted the respondent’s submission, based on the GSTAT’s own precedent in DGAP v. Proctor & Gamble Group, that interest and penalty provisions introduced after the period of alleged profiteering (15.11.2017 to 31.01.2018) could not be retrospectively applied. Accordingly, no interest or penalty was imposed.

Methodology and Merits
The respondent challenged the DGAP’s methodology for calculating profiteering, particularly the use of average base prices and the shift from MRP-based to averaging approaches. The Tribunal found no merit in these objections, noting that the methodology was consistent with legal principles and that the respondent had not demonstrated that the benefit of tax reduction was passed on to consumers. The Tribunal emphasized that under Section 171, each customer is entitled to the benefit of tax reduction, and offsetting benefits to other customers does not absolve the supplier of liability.

Final Decision
The GSTAT Principal Bench concluded that the respondent had profiteered by Rs. 13,61,51,254/- by not passing on the benefit of GST rate reduction to consumers. The respondent was directed to deposit this amount equally in the Consumer Welfare Funds of the Central and respective State/UT governments, as detailed in the order. The Tribunal ordered compliance within four months and declined to impose any interest or penalty.

Significance
This decision clarifies that anti-profiteering proceedings under Section 171 of the CGST Act survive the omission of certain rules and transfer of jurisdiction, and that procedural timelines are directory. The Tribunal reaffirmed the wide investigative powers of authorities and the obligation of suppliers to pass on tax benefits to each consumer, while protecting suppliers from retrospective interest or penalty.