Delhi HC stays order asking J&J to deposit over Rs 230cr profit from sale of baby products

The Delhi High Court Wednesday stayed the NAPA order directing Johnson and Johnson to deposit over Rs 230 crore it allegedly profiteered by not passing on benefits of GST reduction in over 306 items, including baby products, through commensurate price cut. A bench of Justices Vipin Sanghi and Sanjeev Narula also restrained the National Anti-Profiteering Authority (NAPA) and the Centre from initiating any penalty proceedings against healthcare major Johnson and Johnson Pvt Ltd.

It also said that prima facie the methodology used by NAPA to arrive at its finding of profiteering was "flawed".

The court issued notice to the Centre, NAPA and Director General of Anti-Profiteering seeking their stand on the company's petition challenging the direction to deposit the allegedly profiteered amount in a consumer welfare fund.

Apart from quashing of the NAPA order of December 23 last, Johnson and Johnson (J&J) has also sought setting aside of a penalty notice issued to it by the authority on January 27.

It has also sought to declare certain provision of the CGST Act and Rules as unconstitutional.

The bench stayed the order and restrained NAPA from initiating any penalty proceedings against J&J till the next date of hearing on September 24.

NAPA, in its December 23 last order, had held that the company did not pass on the benefit of reduction in tax rate from November 2017 to December 2018 and hence, profiteered an amount of Rs 2,30,40,74,132 in contravention of the Central Goods and Services Tax (CGST) Act.

The government had from November 15, 2017, reduced GST from 28 per cent to 18 per cent on products like baby wipes, baby powder, creams etc which are manufactured by J&J.

NAPA also directed the company to deposit the amount along with an interest of 18 per cent from when the amount was realised by it till it deposits the same in a consumer welfare fund.

J&J has refuted the allegation of profiteering against it, saying the benefit of tax reduction was passed on by it.

It has claimed said that NAPA has determined profiteering of over Rs 230 crore based on "arbitrary, unreasonable and capricious methodology".