Honda car dealers has not contravention of anti-profiteering rules as they passed on benefits of reduced rate.

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Honda car dealers  has not contravention of anti-profiteering

rules as they passed on benefits of reduced rate.

[Dinesh Mohan Bhardwaj v. Vrandavaneshwree Automotive (P.) Ltd. – [2018] ]

Facts of the case:

  1. In the given case, applicant (Dinesh Mohan Bhardwaj) filed an application before the Standing Committee alleging the profiteering practice of Honda car dealer.
  2. He stated that he had entered into a contract to buy a Honda Car through an authorized Honda car dealer for Rs. 9.13 lakhs, which included excise duty (35%), CST (2%) and UP VAT (14%), i.e., in aggregate the tax was 51%. He had also stated that he had taken delivery of the Car on 11-07-2017 after coming into force of the GST w.e.f. 01-07-2017, by paying an amount of Rs. 8,98, 750/-. He had further stated that after 01-07-2017 the respondent was required to reduce the Excise Duty, CST and VAT amounting to 51o/o from the price of the Vehicle of Rs. 9, 13,300/- and then charge SGST @ 14%, CGST @ 14% and Cess @ 1% (Total 29%) on the reduced price. 
  3. The DGSG had investigated whether the rate of tax on the car had been reduced post-GST and if so, whether there was substantial reduction in the rate of tax as had been contended by the applicant and whether the benefit of reduction in rate of tax had been passed on to the applicant.

Held:

  1. The DGSG had found that the applicant had booked a car of premium colour (Orchid White) vide Sale Contract dated 28.04.2017 at exshowroomprice of Rs. 9, 13,300/- (pre-GST), but he took delivery of the Car of base colour (Alabaster Silver) of the same model which had a lower ex-showroom price of Rs. 9,09,300/ (pre-GST).
  2. He had also found that since the applicant had taken delivery of the car of basecolour, he was to be charged Rs. 4,000/- less than the contractual price.
  3. The DGSG had further found that the contention of the respondent that he had reduced the dealer’s margin was not correct, as was evident from his reply dated 28.01.2018 enclosing therein the price list. It had also been revealed that the respondent, in his first reply dated 26.12.2017, had stated that he had reduced his margin from Rs. 33, 736/- to Rs. 25,826/- but in his subsequent reply dated 28.01.2018, he had furnished a post-GST price list wherein two types of dealer’s margins were shown, the first was of an amount of Rs. 26,619/- and the second was of an amount of Rs. 7,000/- shown as dealer’s margin “1 “. The DGSG had concluded that the total dealer’s margin appeared to be Rs. 33,619/- and not Rs. 25,826/, as claimed by the respondent.
  4. The DGSG had further found that the contention of the applicant that the total incidence of tax on the car was reduced from 51 o/o to 29% post-GST, was also not correct as there was a minor reduction in the tax rate in the post-GST period and the tax rate had remained more or less the same.
  5. He had also calculated the comparative rates of pre-GST and post-GST tax on the model of car purchased by the applicant which are given in Table ‘A’ below:- 

                                                    Table – A

    Duty / Tax / Cess

    Pre GST

    Rate (%)

    Post GST

    RATE (%)

    Excise Duty

    (S . No. 285 of Notification

    No.12/2012-CE dt. 17.03.2012 as amended)

    12.5

    –

    Natinal Calamity Contingent Duty

    (NCCD)

    1

    –

    Auto Cess

    0.125

    –

    Infra Cess

    1

    –

    Total (A)

    14.625

    –

    CST (B=0.05% on A)

    0.007

    –

    Total (C=A+B)

    14.632

    –

    Vat (D)=(14.5% on C)

    16.622

    –

    GST+Cess

    –

    29

    Toal tax rate (C+D)

    31.254

    29
  6. The DGSG had also concluded that although the car of premium colour was booked at an amount of Rs. 9, 13,300/- at the pre-GST tax rate, the delivery of the car was taken on 11.07.2017 after implementation of the GST and the respondent had charged an ex-showroom price of Rs. 8,98, 750/- from the applicant, taking into account the correct amounts of basic price, freight, insurance, dealer’s margin etc. and had also correctly charged GST @ 29% and thus the benefit of the reduction in the tax rate was passed on to the applicant by way of reduction of price of the car by an amount of Rs. 10,550/- excluding Rs. 4,000/- which reduced on account of change of colour of the car from premium to base.
  7. In view of the abovementioned findings the conclusion is that Section 171 (1) of the Central Goods and Service Tax, 2017 requiring that “any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on the recipient by way of commensurate reduction in prices” has not been contravened in the present case.

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