2020 (9) TMI 159 - NAPA - GST

Profiteering - purchase of villa - allegation that benefit of ITC not passed on by way of commensurate reduction in price - contravention of section 171 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 w.e.f. 01.07.2017 to 30.06.2018 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 30.06.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) also cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 05.07.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.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: Violation of Section 171(1) of CGST Act, 2017; Imposition of penalty under Section 122(1)(i) of CGST Act, 2017.

Violation of Section 171(1) of CGST Act, 2017:
The case involved a complaint regarding the non-passing of Input Tax Credit (ITC) benefits to buyers by the Respondent. The DGAP's investigation revealed that the Respondent had not passed on the benefit of ITC to buyers, amounting to ?81,67,546/-, from 01.07.2017 to 30.06.2018. The National Anti-Profiteering Authority issued a notice to the Respondent to show cause why the DGAP's Report should not be accepted. After due consideration and hearings, the Authority determined the profiteered amount and held the Respondent in violation of Section 171(1) of the CGST Act, 2017.

Imposition of penalty under Section 122(1)(i) of CGST Act, 2017:
The Respondent was also alleged to have committed an offense under Section 122(1)(i) of the CGST Act, 2017 for denying ITC benefits to buyers and charging excess amounts. The Respondent was issued a notice to explain why penalty should not be imposed. The Respondent submitted that penalty under Section 122 was not applicable as he had paid the profiteered amount and acted in good faith. The Authority considered the submissions and found that no penalty was prescribed for the violation of Section 171(1) during the relevant period. As specific penalty provisions under Section 171(3A) came into force from 01.01.2020, retrospective imposition of penalty was not possible. Therefore, the penalty proceedings against the Respondent were dropped, and the notice for penalty imposition was withdrawn.

This judgment highlights the importance of passing on ITC benefits to buyers as per the provisions of the CGST Act, 2017. It also clarifies the penalty provisions applicable for violations related to anti-profiteering measures and the limitations on retrospective imposition of penalties. The Authority's decision to withdraw penalty proceedings due to the absence of penalty provisions during the relevant period demonstrates a strict adherence to statutory provisions and timelines.