2020 (8) TMI 602 - NAPA - GST

Profiteering - supplies of luggage trolley bag/suitcases , namely Tropic 45 Weekender Black and Neolite Strolly 53 360 (VIP) FIR - allegation that Respondent had denied the benefit of GST rate reduction - violation of the 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 reduction in GST rate from 28% to 18% on the above products w.e.f. 15.11.2017 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 also 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 above 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 invoices while charging excess consideration and GST from the buyers. However. from the perusal of Section 122 (1) (i) of the CGST Act, 2017, it is clear that the violation of the provisions of Section 171 (1) is not covered under Section 122 (1) (i) of the CGST Act, 2017 as it does not provide penalty for not passing on the benefits of tax reduction and ITC and hence the penalty prescribed under Section 122 cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the above Act - It is further revealed that vide Section 112 of the Finance Act; 2019 specific penalty provisions have been added for violation of the provisions of Section 171 (1) which have come in to force w.e.f. 01 01.2020. by inserting Section 171 (3A). Since, no penalty provisions were in existence between the period w.e.f. 15.11.2017 to 31.08,2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) can not be imposed on the Respondent retrospectively. Accordingly, the notice dated 13.06.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

Summary

Issues:
1. Failure to pass on GST rate reduction benefit to consumers.
2. Determination of profiteered amount.
3. Violation of Section 171(1) of the CGST Act, 2017.
4. Imposition of penalty under Section 122(1)(i) of the CGST Act, 2017.
5. Respondent's submission on penalty imposition.
6. Consideration of Respondent's submissions.
7. Applicability of penalty provisions for violation of Section 171(1).
8. Introduction of penalty provisions under Section 171(3A) of the Finance Act, 2019.
9. Retrospective imposition of penalty.
10. Withdrawal of penalty proceedings.

Analysis:
1. The case involved the failure of the Respondent to pass on the benefit of GST rate reduction from 28% to 18% on specific products to consumers, leading to a profiteered amount of ?18,887 between November 15, 2017, and August 31, 2018. The Applicant No. 2 (DGAP) conducted an investigation based on a complaint and found the Respondent in violation of Section 171(1) of the CGST Act, 2017.

2. The National Anti-Profiteering Authority issued a notice to the Respondent after considering the DGAP's report and, after a detailed hearing, determined the profiteered amount to be ?18,887. The Respondent was found to have violated Section 171(1) and was held accountable for not passing on the benefit of the tax rate reduction to consumers.

3. The Respondent was also found to have collected extra amounts from consumers and compelled them to pay more GST, thereby violating Section 122(1)(i) of the CGST Act, 2017, which led to the imposition of a penalty under the relevant provisions.

4. Subsequently, the Respondent submitted arguments against the imposition of penalties, citing compliance with the Authority's previous order and asserting lack of mens rea or deliberate intent to violate the law as reasons for not imposing penalties.

5. The Authority carefully considered the Respondent's submissions, evidence, and relevant provisions of the law. It was established that the Respondent indeed failed to pass on the GST rate reduction benefits, thereby violating Section 171(1) of the CGST Act, 2017.

6. However, it was noted that no specific penalty provisions existed for violations of Section 171(1) during the period of the violation. The Authority highlighted that penalties under Section 122(1)(i) could not be imposed for anti-profiteering violations, as they were not covered under the said section.

7. The introduction of penalty provisions under Section 171(3A) of the Finance Act, 2019, from January 1, 2020, addressed the issue of penalties for violations of Section 171(1) specifically.

8. Given the absence of penalty provisions during the violation period, the Authority decided that penalties under Section 171(3A) could not be imposed retrospectively. Consequently, the penalty proceedings initiated under Section 122(1)(i) were withdrawn, and no penalties were imposed on the Respondent.

9. The decision was communicated to both parties, and the penalty proceedings were dropped, considering the absence of applicable penalty provisions during the violation period.

10. The case was concluded with the order for the file to be closed after the necessary actions were taken based on the judgment.