Here’s a professional case brief of Sharma Trading Company v. Union of India & Ors., W.P.(C) 13194/2018 (Delhi High Court, decided on 23.09.2025)
KEY POINTS
Core purpose: GST rate reductions are intended to lower consumer prices.
No substitutes for price cuts: Keeping the same MRP while increasing quantity/grammage or running freebie/bundling schemes does not satisfy Section 171. These tactics defeat the consumer-benefit objective.
Schemes must be recalibrated: Any ongoing promotions must be reworked immediately when a GST rate is cut so that the benefit shows up as a lower price to the consumer.
MRP is only a ceiling: Businesses may (and should, if needed) sell below MRP to reflect the tax reduction. Only selling above MRP is barred.
No transitional excuses: Operational or transition issues are not a defence; manufacturers and retailers are expected to be prepared to pass the benefit immediately.
Consumer protection lens: Quietly increasing quantity while charging the same MRP is treated as deceptive and curtails consumer choice; it cannot be permitted.
Pass benefit directly in price reduction.
Do not offset with schemes, freebies, or increased grammage.
Maintain full audit trail & documentation.
Remember: Distributor & retailer are independently liable.
Case Brief
Court & Bench
- High Court of Delhi, New Delhi
- Justice Prathiba M. Singh and Justice Shail Jain
Parties
- Petitioner: M/s Sharma Trading Company (Distributor of Hindustan Unilever Ltd.)
- Respondents: Union of India & Ors.
Legal Provisions Involved
- Section 171, CGST Act, 2017 (Anti-profiteering measures)
- Rules 122, 124, 126, 127, 129, 133, 134 of CGST Rules, 2017
- Notifications No. 41/2017-CT(R), 23/2022-CT, 18/2024, 19/2024
Background
- GST on Vaseline VTM 400 ml was reduced from 28% to 18% w.e.f. 15.11.2017.
- Complaint filed alleging that Sharma Trading Company did not pass on this benefit, but instead increased the base price while keeping the same MRP (₹213).
- NAPA order (07.09.2018): Found profiteering of ₹5,50,370/- (later computed as ₹5,55,126/- with adjustments) plus interest @18%, to be deposited in Consumer Welfare Fund (CWF). Penalty was also proposed.
Petitioner’s Arguments
- Quantity (grammage) of the product was increased after GST reduction, justifying same MRP.
- Some promotional schemes (free Dove soap bar with Vaseline) justified price retention.
- The increased base price was set by HUL, not the distributor.
Court’s Findings
- Constitutional validity of Section 171 & Rules already upheld in Reckitt Benckiser India Pvt. Ltd. v. UOI (2024).
- Factually established profiteering: Base price increased from ₹158.66 to ₹172.77 post-GST cut, neutralising consumer benefit.
- Increase in quantity/schemes not acceptable: Court cited Reckitt Benckiser ruling that benefit must be passed through direct price reduction, not via freebies or extra grammage.
- MRP logic clarified: Products can always be sold below MRP, hence no legal bar to reducing consumer price after tax reduction.
- Penalty issue: Following Reckitt Benckiser, penalty proceedings for pre-Section 171(3A) cases are infructuous.
- Relief & Directions:
- Amount of ₹5,55,126/- already deposited with DGAP in FDR to be transferred to Consumer Welfare Fund.
- No penalty imposed due to settled legal position.
Decision
- Writ petition disposed of.
- Profiteering amount confirmed & directed to be transferred to CWF with interest.
- Penalty proceedings dropped.
Professional Views
- Clarity on Anti-profiteering Compliance:
This judgment reinforces that passing GST rate benefit must be via commensurate price reduction only. Neither freebies, increased grammage, nor bundled schemes are substitutes. This sets a strict compliance standard for suppliers/distributors. - Distributor’s Limited Defence:
The Court rejected the defence that HUL’s pricing software dictated base price. As a GST-registered dealer, the distributor had an independent duty under Section 171 to pass on benefit. This increases accountability across the supply chain. - MRP vs. Consumer Price:
The ruling clarifies that while MRP is the upper cap, businesses must reduce actual consumer prices when GST is reduced. Selling below MRP is legally permissible and mandatory where anti-profiteering applies. - Penalty Aspect:
The Court rightly aligned with Reckitt Benckiser that penalty provisions apply only post-Section 171(3A) (introduced later). This avoids retrospective penal liability, but future violations would attract strict penalties. - Practical Impact:
- Manufacturers must recalibrate schemes & pricing immediately after tax rate changes.
- Distributors/Retailers cannot hide behind manufacturer pricing; they remain liable for profiteering.
- Consumers’ interest is central, and authorities/courts are adopting a zero-tolerance approach to non-passing of GST benefits.
✅ In summary: The Delhi High Court has upheld the NAPA’s order, affirming that Sharma Trading Co. profiteered by inflating the base price post-GST cut, thereby denying consumers the mandated benefit. The profiteered sum is directed to be deposited in CWF, but no penalty was levied due to the timing of statutory changes. The judgment is a strong reiteration of the anti-profiteering regime’s consumer-centric purpose.