FIRST INTRA ROUND, AUGUST 2019 - MOOT PROBLEM

1. ABC Ltd. is a company located in India and it has its operations throughout the country.
ABC Ltd. runs a coffee and fast food chain and they operate under the brand name
“Kaffeine”. ABC Ltd. is duly registered under the Central Goods and Services Tax Act,
2017 (‘CGST Act’) and the respective State GST Acts, for supply of restaurant services.

2. Restaurant services were effectively taxable at the rate of 18% at the time of
introduction of Goods and Services Tax (hereinafter: GST) laws. On 15.11.2017, the
applicable rate of tax on such services was reduced to 5% with the condition that no
input tax credit (ITC) could be availed. ABC Ltd. opted to not take the credit and pay
tax at the rate of 5%.

3. The cost of products sold by ABC Ltd. is as under:

Prior to 15.11.2017

Product Name Price (all inclusive)

Cappuccino (250 ml) ₹199

Café Latte (250 ml) ₹249

Choice of sandwich ₹299

15.11.2017 onwards

Product Name Price (all inclusive)

Cappuccino (270 ml) ₹199

Café Latte (270 ml) ₹249

Choice of sandwich ₹269

4. The previous price revision by ABC Ltd. was in January 2018. The revised pricing from
15.11.2017 was arrived at keeping in mind price points, the rise in procurement cost
 and that such prices would continue for the calendar year 2019. ABC Ltd. has a history
of increasing its prices 8-10% on a year to year basis.

5. Pursuant to a complaint and subsequent screening, the Directorate General of Anti-

Profiteering(‘DGAP’) initiated investigations against ABC Ltd. After carrying out
detailed investigations, the DGAP submitted a report to the National Anti-Profiteering
Authority (‘NAA’) wherein it was alleged that the Company had violated Section 171
of the CGST Act, 2017 for all the 3 products. The finding was based on the premise
that the Company did not reduce the cost of the products commensurate to the rate of
reduction in tax. According to the DGAP, ABC Ltd. should have reduced its prices to
ensure that the products were 13% cheaper post the change in the rate of tax.

6. ABC Ltd. filed a Writ Petition before the Hon’ble High Court of Delhi challenging the
report and the authority of the NAA. It was contended by ABC Ltd. that:

• The composition of the NAA as prescribed under the Central Goods and Services
Tax Rules, 2017 is illegal and unconstitutional. Hence, they cannot adjudicate the
claim.

• Section 171 of the CGST Act and the Rules framed thereunder is unconstitutional
being violative of Articles 14 & 19(1)(g) of the Constitution of India.

• It duly complied with the mandate of Section 171 of the CGST Act and the method
adopted by the DGAP is arbitrary and fallacious.

7. Apart from refuting the above contentions, the State objected to the challenge as being
premature. It was contended that the challenge could only be made after final
determination of issue by the NAA.

8. Both parties are directed by the Court to file Written Submissions by 02.08.2019.