2020 (9) TMI 38 - NAPA - GST

Profiteering - Sanitary Napkins - allegation that the reduction of rate of GST not passed on by way of commensurate reduction in prices - Contravention of section 171 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 12% to Nil on the above product w.e.f. 27.07.2018 to 30.09.2018 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. 27.07.2018 to 31.03.2018 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the notice dated 03.07.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.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 Involved:
Violation of Section 171(1) of the CGST Act, 2017 - Passing on benefit of GST rate reduction, denial of ITC benefit, and profiteering.
Imposition of penalty under Section 122(1)(i) of the CGST Act, 2017 for violation of anti-profiteering provisions.
Applicability of penalty provisions under Section 171(3A) of the Finance Act, 2019 retrospectively.

Violation of Section 171(1) of the CGST Act, 2017:
The case involved a complaint regarding the non-passing of benefits from a GST rate reduction on "Sanitary Napkins" by the Respondent. The DGAP's report highlighted the denial of ITC benefits to buyers, amounting to ?5,283, during the period from 27.07.2018 to 30.09.2018. The National Anti-Profiteering Authority determined the profiteered amount and held the Respondent in violation of Section 171(1) of the CGST Act, 2017, for not reducing prices in line with the tax rate reduction. The Respondent was found to have compelled buyers to pay more, leading to a violation of Section 122(1)(i) of the Act, warranting penalty imposition.

Imposition of Penalty under Section 122(1)(i) of the CGST Act, 2017:
The Respondent was issued a notice to explain why penalty under Section 122(1)(i) should not be imposed. The Respondent argued against penalty imposition, citing compliance with the Authority's order and lack of mens rea for deliberate violation. However, the Authority noted the Respondent's failure to pass on the GST rate reduction benefit, leading to a violation of Section 171(1). It was observed that Section 122(1)(i) did not specifically cover violations related to anti-profiteering provisions, and hence, penalty under this section was deemed inapplicable.

Applicability of Penalty Provisions under Section 171(3A) of the Finance Act, 2019 Retrospectively:
The Finance Act, 2019 introduced penalty provisions under Section 171(3A) for violations of Section 171(1), effective from 01.01.2020. As the Respondent's violation occurred prior to this provision's enactment, the Authority concluded that the penalty prescribed under Section 171(3A) could not be applied retrospectively. Consequently, the penalty notice issued under Section 122(1)(i) was withdrawn, and the penalty proceedings against the Respondent were dropped.

In conclusion, the judgment addressed the violation of anti-profiteering provisions under Section 171(1) of the CGST Act, the inapplicability of penalty under Section 122(1)(i) for such violations, and the non-retrospective enforcement of penalty provisions introduced under Section 171(3A) of the Finance Act, 2019.