In a first welcome move the Delhi High Court has allowed Samsonite India, a company engaged in the business of manufacturing and selling travel bags, to deposit the profiteered amount of goods and services tax (GST) in a staggered manner in view of the Covid-19 pandemic situation.

The complaint was lodged against company for profiteering on a specific product (American Tourister Sky Tracer HL Blue 68-cm Hard Trolley). The National Anti-profiteering Authority (NAA) held petitioner guilty and had imposed a fine of Rs 25.74 crore on Samsonite India, for allegedly not reducing prices of its products after the GST Council reduced the tax rates from 28% to 18% in December, 2017. The company was also asked to pay 18% interest rate for the period between the amount collected by it from customers and the amount of profiteering deposited. NAA asked Samsonite to pay half the amount of Rs 12.87 crore to the Central consumer welfare fund and the other half to the consumer welfare funds of the states and union territories.

A petition was filed by M/S Samsonite South Asia Pvt Ltd at Delhi HC to challenge the constitutional validity and legality of the NAA as well as Section 171 of the CGST Act and Rule 126 of CGST, Rules. The petitioner claimed that the absence of any methodology of the entire proceedings before the NAA is in breach of the principles of natural justice and due process and has resulted in arbitrary and contradictory orders.

The company had argued that the product was sold not by it but by Amazon India and under anti-profiteering laws the investigation could be done against supplier of goods.

The Authority dismissed the arguments of the company, saying that the complaint was lodged against it and not Amazon India. Also, the complaint was lodged on the basis of the maximum retail price (MRP) which only Samsonite can fix and not Amazon, the authority said.

The petitioner states that the total alleged profiteered demand as per the findings of the National Anti-Profiteering Authority under the impugned order dated 28th April 2020 passed against the Petitioner, is Rs.25,73,82,482/-, which includes Rs.3,92,61,734/-, the GST imposed on the net profiteered amount which has already been deposited by the Petitioner with the Tax Department.

The Court keeping in view the Covid-19 pandemic situation, directs the petitioner to deposit the principal profiteered amount i.e. Rs 21,81,20,748/- (i.e. Rs 25,73,82,482/- minus Rs 3,92,61,734/-) in six equated monthly installments in the consumer welfare funds of Centre and states. The interest amount as well as the penalty proceedings initiated by the Revenue is stayed till further orders.

The above decision will have a strong persuasive value for other corporates seeking an extension of payments. It is expected to benefit sectors like FMCG and Real Estate that are most affected by the anti-profiteering provisions.