2020 (8) TMI 771 - NAPA - GST

Profiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of additional Input tax Credit (ITC) by way of reduction in the price - violation of the provisions of Section 171 (1) of GST Act - HELD THAT - It has been revealed that the Respondent had not passed on the benefit of additional Input tax Credit (ITC) to the Applicant as well as other homebuyers who had purchased them in his Project Eldeco County for the period from 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 - 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the notice dated 11.03.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.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 the benefit of additional Input Tax Credit (ITC) to buyers.
2. Violation of Section 171 (1) of the CGST Act, 2017.
3. Imposition of penalty under Section 122 (1) (i) of the CGST Act, 2017.
4. Applicability of penalty provisions under Section 112 of the Finance Act, 2019 for violation of Section 171 (1).

Analysis:
1. The case involved the Applicant No. 2, the Director General of Anti-Profiteering (DGAP), submitting a report stating that the Respondent did not pass on the benefit of additional ITC to buyers, amounting to a specific sum, during a particular period. This led to a finding of profiteering and violation of Section 171 (1) of the CGST Act, 2017. The Anti-Profiteering Authority issued a notice to the Respondent to show cause, following which a detailed order was passed determining the profiteered amount and confirming the violation of Section 171 (1).

2. During the proceedings, it was established that the Respondent not only collected extra amounts from customers but also made them pay more GST on these additional amounts, leading to a potential offence under Section 122 (1) (i) of the CGST Act, 2017. The Authority considered imposing a penalty under this section in addition to the profiteered amount determined earlier.

3. Subsequently, the Respondent was issued a notice to explain why the penalty under Section 122 (1) should not be imposed. The Respondent argued against the penalty, stating that he had already complied with the Authority's previous order and had no mens rea or deliberate intent to violate the law. The Respondent contended that penalty should only be imposed in cases of deliberate non-compliance.

4. The Authority carefully examined the submissions and relevant provisions. It was noted that no specific penalty had been prescribed for the violation of Section 171 (1) of the CGST Act, 2017. The Authority also highlighted that Section 122 (1) (i) did not cover the failure to pass on tax benefits, and hence, the penalty under this section was not applicable in this context. The Authority further pointed out the introduction of penalty provisions under Section 112 of the Finance Act, 2019, specifically addressing violations of Section 171 (1).

5. As there were no penalty provisions in place during the period of violation by the Respondent, the Authority concluded that the penalty under Section 112 (3A) could not be imposed retrospectively. Consequently, the penalty proceedings initiated against the Respondent were withdrawn, and the notice for penalty under Section 122 (1) (i) was dropped. The Authority emphasized the absence of penalty provisions during the relevant period as a key factor in this decision.