GSTAT: The time limit of six months prescribed under Rule 133 of CGST Rules is directory in nature

The time limit of six months prescribed under Rule 133 of CGST Rules is directory in nature

Facts of the Case

• Proceedings arise from DGAP’s investigation report dated 14.10.2022 against M/s A.J. Enterprises (Respondent) under Section 171 of the CGST Act and Rule 129(6) of the CGST Rules.
• DGAP determined that the Respondent profiteered Rs. 13,32,322/- during 15.11.2017 to 30.09.2019 by not passing on the benefit of GST rate reduction from 18% to 5% (without ITC) on restaurant services.
• Respondent operated a ‘Subway’ franchise outlet at Amanora Mall, Pune, under a franchise agreement with Subway India.
• An application alleging profiteering was filed before the Standing Committee on Anti-Profiteering, which, after examination by the Maharashtra State Level Screening Committee, was forwarded for further action.
• Standing Committee, prima facie satisfied of non-passing of benefit, referred the matter to DGAP for investigation.
• DGAP issued notice to Respondent to show cause and compute the benefit passed on, if any.
• Respondent denied allegations and submitted detailed reply with documents.
• DGAP’s initial report (20.08.2020) found contravention and profiteering of Rs. 15,66,821/-.
• NAPA, by interim order dated 13.04.2022, remanded the matter to DGAP for re-investigation due to discrepancies.
• DGAP’s fresh report (14.10.2022) recomputed profiteering at Rs. 13,32,322/- for 15.11.2017 to 30.09.2019.
• DGAP concluded Respondent increased base prices and failed to pass on GST rate reduction benefit as per Notification No. 46/2017–Central Tax (Rate) dated 14.11.2017.
• GSTAT Principal Bench, empowered to examine anti-profiteering cases from 01.10.2024, issued notice to Respondent for written submissions.
• Respondent filed written submissions contesting DGAP’s findings; hearing held with counsel representing both parties.

Contentions of the Parties

Respondent

• Outlet closed due to operational and commercial challenges; operated under specific commercial terms with Subway India and online aggregators (royalty, advertisement, lease rent, CAM charges, commissions).
• Menu prices revised periodically due to input cost inflation and market dynamics; price revisions and rounding off were operational, not for profiteering.
• Proceedings barred by limitation; no fraud or misrepresentation alleged; limitation under Section 74 is five years.
• DGAP arbitrarily selected investigation period without considering legitimate price revisions due to rising costs.
• DGAP calculated ITC loss at 8.21%; maximum gross profiteering cannot exceed 4.38%; DGAP’s computation (7.40%) is incorrect.
• Base price increased by 13% on average; loss of ITC ranged 10–11%; minimum cost increased by 12.69% post 15.11.2017.
• Relied on Kumar Gandharva v. KRBL Ltd. (2018) and DGAP v. Proctor & Gamble Group (2025) to argue legitimate price increase and non-applicability of interest/penalty for periods prior to enabling provisions.

DGAP

• Proceedings not barred by limitation; time limit for DGAP report is directory, not mandatory (P.T. Rajan v. TPM Sahir & Ors.).
• Methodology for computing profiteering is correct and as per Section 171; average base price calculated for each product/channel based on Respondent’s data.
• Respondent failed to provide documentary evidence for erroneous ITC loss computation; DGAP’s methodology and computation are correct.

Issues

• Whether the proceedings are barred by limitation due to alleged delay in passing the final order or in the investigation period.
• Whether the Respondent indulged in profiteering by increasing base prices of products coinciding with GST rate reduction, thereby failing to pass on the benefit as required under Section 171 of the CGST Act.
• Whether the Respondent is liable to pay interest on the profiteered amount, and if so, from which date.
• Whether penalty under Section 171(3A) of the CGST Act can be imposed retrospectively for the period under investigation.

Decision

A. Limitation and Nature of Time Limits under Rule 133 (p35–41)

• The Tribunal considered the Respondent’s argument that the Authority was required to pass its final order within six months from receipt of DGAP’s report and that this timeline is mandatory; also, that the maximum limitation period is five years in cases of fraud or misrepresentation, which is not alleged here. (p36)
• The DGAP’s representative argued that the time limit under Rule 133 is directory, not mandatory. (p37)
• Relied on P.T. Rajan v. T.P.M Sahir & Ors. (AIR 2003 SC 4603), where the Supreme Court held that statutory timelines for performance of duties are directory unless consequences for non-compliance are prescribed. (p38)
• Relied on Nestle India Ltd. v. Union of India (Delhi HC), which held that the six-month limitation in Rule 133 is directory as no consequence is prescribed for non-adherence. (p39)
• Relied on Reckitt Benckiser India Pvt. Ltd. v. Union of India (Delhi HC), which held anti-profiteering provisions are beneficial legislation and timelines are directory. (p40)
• Held that anti-profiteering provisions are beneficial legislation aimed at consumer protection; the six-month time limit under Rule 133 is directory, not mandatory; proceedings are not barred by limitation. (p41)

B. Profiteering: Passing on Benefit of GST Rate Reduction (p42–51)

• The core dispute is whether the Respondent indulged in profiteering by increasing base prices on the date of GST rate reduction, thereby not passing on the benefit to consumers as required by Section 171. (p42)
• It is admitted that Respondent increased base prices of 6′ Aloo Patty and 6′ Hara Bhara Kabab on 15.11.2017, coinciding with the effective date of GST rate reduction from 18% to 5%. (p43)
• Respondent argued that cost increases (including ITC loss and operational expenses) justified the price increase, and that the increase was marginal compared to the tax rate reduction. (p44–45)
• Tribunal examined Respondent’s tabulated data and found that base prices remained unchanged until 14.11.2017, but were increased on 15.11.2017, the date of GST rate reduction. (p46)
• Held that Respondent failed to substantiate price increases with cogent evidence or justify the timing of the increase vis-à-vis operational cost increases; in absence of such evidence, presumption is against Respondent, indicating arbitrary price increase without passing on benefit to consumers. (p47)
• Relied on DGAP v. Urban Essence (Subway Franchisee) [(2025) taxcode.in 01 GSTAT], which, following Reckitt Benckiser India Pvt. Ltd., held that the presumption of passing on GST rate reduction is rebuttable only by cogent, clear, and unequivocal evidence, which Respondent failed to provide. (p48)
• Observed that increasing base prices on the same date as the rate reduction indicates intent to maintain the same MRP, thus not passing on the benefit; Respondent failed to provide plausible explanation for the timing. (p49)
• Regarding the period of investigation, Tribunal held that DGAP’s period (15.11.2017 to 30.09.2019) was as per NAPA’s remand order, and Respondent cannot now dispute it. (p50)
• Held that Respondent indulged in profiteering by not passing on the benefit of GST rate reduction to consumers as required under Section 171. (p51)

C. Interest on Profiteered Amount (p52–55)

• Respondent argued that interest cannot be levied for any period prior to the introduction of the statutory provision under Rule 133(3)(c).
• Rule 133(3)(c) (as amended by Notification No. 31/2019-Central Tax, dated 28.06.2019) provides for interest at 18% from the date of collection of higher amount.
• Tribunal, relying on DGAP v. Proctor & Gamble Group [(2025) taxcode.in 05 GSTAT], held that interest is leviable only from 28.06.2019, not for any period prior. (p54)
• Held that for the violation period 15.11.2017 to 30.09.2019, Respondent is liable to pay interest under Rule 133(3)(c) from 28.06.2019 till deposit of the profiteered amount. (p55)

D. Penalty under Section 171(3A) (p56)

• Section 171(3A) for imposition of penalty came into force from 01.01.2020; period of investigation is 01.07.2017 to 30.09.2019.
• Held that penalty cannot be imposed retrospectively for the period under investigation. (p56)

E. Directions and Orders (p57–60)

• DGAP’s report dated 14.10.2022 is accepted. (p57)
• Respondent directed to deposit the profiteered amount along with interest at 18% from 28.06.2019 to 30.09.2019; 50% to Central Consumer Welfare Fund, 50% to Maharashtra Consumer Welfare Fund. (p58)
• Copy of judgment to be sent to Jurisdictional Commissioner CGST/SGST for necessary action. (p59)
• Judgment pronounced in open court. (p60)

Conclusion

The Tribunal concluded that the Respondent increased the base prices of its products on the date of GST rate reduction without providing cogent evidence to justify such increase, thereby failing to pass on the benefit of tax reduction to consumers as mandated by Section 171 of the CGST Act. The proceedings were held not to be barred by limitation, interest is leviable only from 28.06.2019, and no penalty can be imposed retrospectively. The DGAP’s report was accepted and the Respondent was directed to deposit the profiteered amount with interest as specified.

Disposition

The appeal is dismissed; the DGAP’s report dated 14.10.2022 is accepted. The Respondent is directed to deposit the profiteered amount of Rs. 13,32,322/- along with interest at 18% from 28.06.2019 to 30.09.2019, with 50% each to the Central Consumer Welfare Fund and Maharashtra Consumer Welfare Fund. No penalty is imposed.

Source: Director General of Anti-Profiteering (DGAP) v. A J Enterprises, (2026) taxcode.in 32 GSTAT