Delhi bench orders deposit into Consumer Welfare Fund, says tax cut benefit was not passed on to consumers
The Goods and Services Tax Appellate Tribunal (GSTAT) has held CG Foods, the company behind the Wai Wai instant noodle brand, responsible for profiteering after it failed to transfer the benefit of a GST rate reduction to buyers. The tribunal calculated the undue gain at Rs 90.9 lakh (around $1.1 million).
As part of its ruling, the tribunal instructed the company to deposit the amount into the Consumer Welfare Fund. It also directed CG Foods to file a compliance report with the relevant tax authorities within four months.
The order, issued by the Delhi bench last week, affirmed earlier findings of the Directorate General of Anti-Profiteering (DGAP). The investigation had concluded that the company increased the base prices of its noodle products even after the GST rate was brought down to 12 per cent from 18 per cent starting 15 November 2017.
Authorities determined that the profiteering occurred over a period stretching from November 2017 to December 2018.
“The respondent has failed to establish any cogent basis for increasing the base prices of the subject goods despite the reduction of GST rate from 18 per cent to 12 per cent.”
Section 171 of the Central GST Act obligates companies to pass on the advantage of any tax rate reduction or additional input tax credit to consumers through proportionate price reductions.
Examining invoice records, the tribunal observed that the tax-adjusted fair price of a carton of Wai Wai Chicken Noodles should have been Rs 226.66. Instead, CG Foods charged Rs 237.57, with the excess amount treated as over-recovery from customers.
In its defence, the company pointed to ongoing cost pressures during the period under review, citing higher expenses for wheat flour, palm oil, spices, packaging materials and freight. It also argued that competitive intensity in the instant noodles segment limited its ability to adjust pricing, while noting that the maximum retail price (MRP) had remained unchanged.
The tribunal rejected these arguments, stating that most of the cost escalations referred to by the company had taken place before the GST rate reduction and therefore could not justify raising base prices afterward. Referring to the Delhi High Court judgment in Reckitt Benckiser India Pvt Ltd v. Union of India, the bench reiterated that the company failed to provide any “cogent basis” for the price increase.
However, the tribunal chose not to impose interest or financial penalties. It observed that the legal provisions allowing such measures came into effect only after the period in which the violation was found to have occurred.
