Delhi HC stays order holding Johnson & Johnson indulged in profiteering after GST exemption to sanitary napkins

The Delhi High Court today stayed the National Anti-Profiteering Authority order holding that Johnson & Johnson Private Ltd had indulged in profiteering as it failed to pass on the commensurate benefit of GST exemption to the buyers of sanitary napkins. (Johnson & Johnson vs UOI).A Divison Bench of Justices Vipin Sanghi and Sanjeev Narula also issued notice to the Central Government, National Anti-Profiteering Authority, CGST Authorities etc in a petition preferred by Johnson & Johnson (Petitioner). .While staying the initiation of penalty proceedings as well, the Court opined that the order passed by the National Anti-Profiteering Authority, prima facie, needed consideration..In July 2018, the rate of tax on sanitary napkins was made nil from the earlier rate of 12%..In October 2018, a notice was issued by Director General of Anti-Profiteering to the Petitioner for initiation of an investigation after the Standing Committee on anti-profiteering forwarded complaints in this regard..In response, the Petitioner provided the relevant details sought by Director General of Anti-Profiteering such copies of return, copies of sample invoices, price list of sanitary napkins etc..Covering the period from July 27, 2018 to September 30, 2018, the Director General of Anti-Profiteering furnished its report to the National Anti-Profiteering in March 2019. The Report, inter alia, concluded that the Petitioner profiteered a total amount of Rs 42,70,18,581 during the relevant period i.e. July 27, 2018 to September 30, 2018..The Report stated that although the MRP of the product had been reduced, the invoices issued by the distributors/retailers to the ultimate customer indicated that the base price of the product had been increased and thus the final selling price remained the same, despite the reduction in the rate of tax..Thereafter, the National Anti-Profiteering Authority issued notice to the Petitoner asking why the report should not be accepted and Petitioner's liability for profiteering should not be determined..In November 2019, the National Anti-Profiteering Authority passed an order holding that the Petitioner did not pass on the commensurate benefit of reduction in the rate of tax to its recipients beteen July 27, 2018 to Septmeber 30, 2018 and hence profiteered an amount of over Rs 42 crore in contravention of Section 171(1) CGST Act..In December, 2019, the National Anti-Profiteering Authority issued penalty notice against the Petitioner proposing to impose penalty on it under Section 171(3A) of the CGST Act read with Rule 133(3)(d) of the CGST Rules..The Petitioner has assailed the methodology adopted by the Director General of Anti-Profiteering, calling it "presumptive" and has argued that order was passed in gross violation of principles of natural justice..Petitioner has also challenged the constituional validity of Section 171 of CGST Act and Rules 126, 127 and 133 of the CGST Rules. It is contended that the provisions are in violation of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India. .The Petitioner was represented by Senior Advocate Arvind Datar. The Petition was filed through Lakshmikumar & Sridharan Advocates V Lakshmikumaran, BL Narsimhan, L Badri Narayanan, Charanya Lakshmikumara, Karan Sachdeva, Yogendra Aldak..The matter would be heard next on September 29.