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2019 Supreme(Bom) 1476
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
M.S. SANKLECHA, NITIN JAMDAR, JJ.
Hardcastle Restaurants Pvt. Ltd., Mumbai - Appellant
Versus
Union of India - Respondent
Writ Petition No. 3492 of 2018
Decided On : 01-10-2019
Advocate Appeared:
Rohan Shah, Adv., Divya Jeswant, Adv., Mayank Jain, Adv., Zoheb Hossain, Adv., J.B. Mishra, Adv.
The main legal point established in the judgment is the importance of fair decision-making and the impact of the order of the Authority, emphasizing the need for fairness and transparency in adjudication.
Headnote:
Profiteering - Goods and Services Tax - Section 171 of the Goods and Services Tax Act - Summary of Acts and Sections: The court discussed the provisions of Section 171 of the Goods and Services Tax Act, which mandates the passing on of tax rate reductions to consumers. The court also highlighted the composition and functioning of the Anti-Profiteering Authority under Chapter XV of the Central Goods and Services Tax Rules, 2017, and the procedure for conducting the proceedings laid down in Rules 128 to 132 of the Rules. The court emphasized the importance of fair decision-making and the impact of the order of the Authority.
Fact of the Case:
The case involved a challenge to an order passed by the National Anti-Profiteering Authority against a private limited company operating quick-service restaurants under the brand name McDonald's in Western and Southern India. The Authority had directed the company to reduce prices of its products and deposit an amount to the Consumer Welfare Fund along with interest, based on allegations of illegal profiteering.
Finding of the Court:
The court found that the order passed by the National Anti-Profiteering Authority was in violation of the principles of natural justice and fairness, and therefore set aside the order. The court also highlighted the importance of public confidence in decision-making by courts and tribunals, emphasizing the need for fairness and transparency in adjudication.
Issues: The main contention of the Petitioner was the violation of the principles of natural justice, as the order was signed by a member who had joined after the hearings were completed. The Respondents justified the order, contending that it was a clear case of profiteering and that the decision was an institutional decision.
Ratio Decidendi: The court held that the order signed by a member who had joined after the hearings were completed resulted in a violation of the principles of natural justice and fairness, and therefore set aside the order. The court also emphasized the importance of public confidence in decision-making by courts and tribunals, highlighting the need for fairness and transparency in adjudication.
Final Decision: The impugned order passed by the National Anti-Profiteering Authority was set aside, and the proceedings were restored. The Petitioner was directed to appear before the Authority on a specified date. All contentions of the parties on merits, jurisdiction, and validity of the Authority were kept open. The Rule was made absolute in the above terms, with no costs.
JUDGMENT :
NITIN JAMDAR, J.
1. Rule. Rule is made returnable forthwith. Respondents waives service. Taken up for final disposal.
2. The Goods and Service Tax regime was introduced in the year 2017. Thereafter tax rates for certain items were reduced. The State noticed that the benefit of reduced tax rates was not being passed on to the consumers. For this purpose, the National Antiprofiteering Authority is constituted under section 171 of the Goods and Services Tax Act. The Authority can direct the registered persons to pass on such benefits to the consumers and if the beneficiary cannot be identified, to deposit it in a welfare fund. The Authority is empowered to levy penalty on the registered person and take further deterrent measures. One such order passed by the Authority against the Petitioner is the subject of challenge in this Petition.
3. The Petitioner No1-Hardcastle Restaurants is a private limited company. The Petitioner no.2 is the director. For convenience, they are referred in singular. Petitioner operates quickservice restaurants under the brand name McDonald's in Western and Southern India. The Petitioner serves around 2320 types of food and beverages items from its restaurants. The Petitioner is registered under the Goods and Services Tax Act, 2017 in ten States. After the commencement of GST Act till 14 November 2017, the services rendered by the Petitioner were subjected to 18% of GST. A notification was issued on 14 November 2017 reducing the rate of GST to 5% with effect from 15 November 2017. As a result, the Petitioner had to charge GST at 5% on the services rendered without availing impugned tax credit of the taxes paid on input, input services and capital goods.
4. Some customers of the Petitioner made complaints that, though the rate of GST on restaurant services was reduced from 18% to 5% with effect from 15 November 2017, the Petitioner had increased the prices of product sold, which was an act of illegal profiteering. The Standing Committee on Anti Profiteering examined the complaints. The Standing Committee referred the complaints to the Director-General of Safeguards. The DirectorGeneral called upon the Petitioner to submit a reply to the allegations levelled in the complaints and also to suo-motu determine the quantum of benefit the Petitioner had not passed on to the consumers between 15 November 2017 to 31 January 2018. The persons who had filed the complaints/applications were given the opportunity to inspect the evidence and reply furnished by the Petitioner. The applicants did not attend nor participated any further. The Petitioner filed a reply on 5 January 2018 and denied the allegations.
5. The Director-General analyzed the material placed before it by the Petitioner. The Director-General noted that the Petitioner was selling 1844 types of products and after comparing the price list published before and after 15 November 2017, opined that the Petitioner had increased the base price of 1774 products, which constituted 96.20% of its total products. Though the Petitioner had charged GST at 5% on or after 15 November 2017, due to the increase in the base price, the customers had to pay the same price charged before 15 November 2017. The DirectorGeneral, after setting out the reasons, concluded that the profiteering amount was of Rs.7.49 crores. The Director-General submitted a report accordingly to the Authority.
6. The Anti-Profiteering Authority considered the report of the Director-General in its sitting held on 5 July 2018. It was decided to give hearing to the interested parties and to fix schedule of hearings. The Director-General was represented through the Officers. The Petitioner was represented through its Chief Finance Officer, Chartered Accountant and Advocate. Complainants did not remain present. The Authority consisted of three members: Mr. B.N. Sharma, Chairman, Mr. J.C. Chauhan, Technical Member, Ms. R. Bhagya Devi, Technical Member. They heard the Petitioner on 24 July 2018, 9 Augu
