Reprieve for HUL as Delhi High Court stays ₹462-cr demand by anti-profiteering body

Our Bureau Mumbai | Updated on January 16, 2019 Published on January 16, 2019

The Delhi High Court has stayed the demand of ₹462 crore, made on Hindustan Unilever (HUL) by the National Anti-profiteering Authority (NAA).

“The High Court, while staying the demand, has directed the NAA that no coercive action be taken, and no penalty proceedings be continued against HUL until the final determination of the matter in the court. Since the matter involves some issues that require a detailed examination of contentions of both the parties,” HUL said in a statement.

The High Court has, however, asked HUL to deposit ₹90 crore in two instalments (₹50 crore by March 15 and ₹40 crore by May 15) in the Consumer Welfare Fund by May 15.

The NAA had held HUL guilty of profiteering, for failing to pass on the benefit of lowered Goods and Services Tax on certain FMCG products. The core of the issue is the reduction of GST on 178 items to 18 per cent from 28 per cent, which came into effect from November 15, 2017. The reduction covered items such as detergents, washing and cleaning preparations, liquids and creams for washing the skin, shampoos, shaving cream and beauty or make-up preparations.

Soon after the order, an anonymous complaint was filed before the Director-General, Anti-Profiteering, alleging that the FMCG major had not passed on the benefit of lower taxes to its customers.

After a probe, the authority held that the company profiteered to the extent of ₹455.92 crore by not passing on the benefit to its customers. It was also held guilty of wrongly availing itself of the benefit of TRAN-2 credit (credit on tax paid under the pre-GST regime) to the tune of ₹78.97 crore. The total profit arising out of the alleged infractions was calculated to be ₹534.89 crore.

Value of benefit

However, the authority allowed the company’s claim of ₹68.77 crore, which the latter said was the value of benefit passed on to the consumers by way of higher grammage. It also allowed ₹3.80 crore for the supplies made to the armed forces. Adjusting for these amounts and the amount already paid, the company will have to deposit ₹383.25 crore with the Consumer Welfare Funds at Central and States levels.

HUL, on the other hand, maintained that in the absence of set rules and guidelines on profiteering, it has gone by the spirit of the law, and passed on the entire benefit received under GST to consumers — either through reduction in prices or through increase in grammage. In addition, HUL suo moto offered to pay to the Government the benefits which accrued to the company but could not be passed on to the consumers. This amount aggregating to ₹160 crore (including ₹36 crore on behalf of redistribution stockists), has since been deposited with the Consumer Welfare Fund.

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Published on January 16, 2019
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