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2019 (11) TMI 1508 - NAPA - GSTProfiteering - purchase of flat - allegation is that the Respondent had not passed on the benefit of Input Tax Credit in respect of the flat purchased by him, by way of commensurate reduction in price - contravention of provisions of Section 171 (1) of CGST Act - Penalty - HELD THAT - It has been revealed that the Respondent has not passed on the benefit of input tax credit to his buyers who had purchased flats in his project Laurel Heights w.e.f 01.07.2017 to 31.08.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT - It is revealed from the perusal of the CGST Act and the Rules framed under it that no penalty had been prescribed for violation of the provisions of Section 171 (1) of the Act, therefore, the Respondent was issued show cause notice to state why penalty should not be imposed on him for violation of the above provisions as per Section 122 (1) (i) of the above Act as he had apparently issued incorrect or false invoice while charging excess consideration and GST from the buyers. However, from the perusal of Section 122 (1) (i) it is clear that the violation of the provisions of Section 171 (1) is not covered under it as it does not provide penalty for not passing on the benefits of tax reduction and ITC and hence the above penalty cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the above Act. Since no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 31.08.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 18.06.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped. Application disposed off.
Issues:
Violation of Section 171(1) of the CGST Act, 2017 - Non-passing of Input Tax Credit benefit to buyers. Imposition of penalty under Section 122(1)(i) of the CGST Act, 2017 for profiteering. Applicability of penalty provisions for violation of Section 171(1) during a specific period. Withdrawal of penalty proceedings due to absence of penalty provisions during the violation period. Analysis: 1. The case involved a complaint regarding the Respondent's failure to pass on the benefit of Input Tax Credit (ITC) to buyers of flats post-GST implementation. The investigation found that the Respondent had not reduced prices of flats to reflect ITC benefits, resulting in profiteering and violation of Section 171(1) of the CGST Act, 2017. 2. The Anti-Profiteering Authority issued a show-cause notice to the Respondent based on the investigation report. After due consideration and hearings, the Authority determined the profiteered amount and held the Respondent in violation of Section 171(1) of the Act, emphasizing the non-reduction of flat prices despite denial of ITC benefits. 3. Additionally, the Respondent was found to have compelled buyers to pay more due to the non-passing of ITC benefits, leading to an offense under Section 122(1)(i) of the CGST Act, 2017. The Authority decided that penalty proceedings would continue based on the violation. 4. The Respondent filed a writ petition challenging the order, and the High Court directed the continuation of penalty proceedings pending the petition's outcome. Subsequently, the Respondent was issued a notice regarding the imposition of penalties under Section 122 of the Act. 5. The Respondent argued against the imposition of penalties, citing the pending writ petition. However, the Authority noted that the penalty provisions for violation of Section 171(1) were not explicitly prescribed until the Finance Act, 2019 introduced Section 171(3A) effective from January 2020. 6. As no penalty provisions existed during the violation period (July 2017 to August 2018), the Authority withdrew the penalty notice issued to the Respondent under Section 122(1)(i) as retrospective imposition of penalties under Section 171(3A) was not permissible. Consequently, the penalty proceedings were dropped. 7. The decision highlighted the absence of specific penalty provisions for non-passing of ITC benefits under Section 171(1) during the relevant period, leading to the withdrawal of penalty proceedings against the Respondent due to the retrospective inapplicability of penalty provisions introduced post-violation. 8. The order concluded by directing the supply of the order copy to both parties and the closure of the file upon completion of the proceedings.
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