2020 (10) TMI 1054 - NAPA - GST

Profiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of additional Input tax Credit (ITC) - violation of provisions of Section 171 (1) of the CGST Act 2017 - penalty - HELD THAT - The Respondent had not passed on the benefit of additional Input tax Credit (ITC) to the Applicant No. 1 as well as other home buyers who had purchased flats and commercial units in his Project Synera during the period from 01.07.2017 to 31.12.2018 and hence the Respondent has violated the provisions of Section 171 (1) of the CGST Act 2017. Penalty - HELD THAT - It is also revealed 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 vide Notification No. 01/2020-Central tax dated 01.01.2020 by inserting Section 171 (3A) in the CGST Act 2017. Since no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 31.12.2018 when the Respondent had violated the provisions of Section 171 (1) of the CGST Act 2017 the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly the notice dated 27.12.2019 issued to the Respondent for imposition of penalty under Section 177 (3A) of the CGST Act 2017 is hereby withdrawn.

Summary

Issues:
1. Failure to pass on the benefit of additional Input tax Credit (ITC) to buyers.
2. Determination of profiteered amount and violation of Section 171 (1) of the CGST Act, 2017.
3. Liability for penalty under Section 171 (3A) of the CGST Act, 2017.

Analysis:

Issue 1: Failure to pass on the benefit of additional ITC
The case involved the Applicant's complaint regarding the Respondent's failure to pass on the benefit of additional Input tax Credit (ITC) to buyers of flats in the "Synera" project. The DGAP's investigation revealed that the Respondent denied ITC benefits amounting to Rs. 1,42,06,267 to the Applicant and other buyers from 01.07.2017 to 31.12.2018, violating Section 171 (1) of the CGST Act, 2017.

Issue 2: Determination of profiteered amount and violation of Section 171 (1)
After considering the DGAP's report, the Authority issued a notice to the Respondent, who failed to justify the denial of ITC benefits. Consequently, the Authority determined the profiteered amount as Rs. 1,42,06,267 under Section 171 (2) of the CGST Act, 2017, for the period mentioned. The Respondent was found in violation of Section 171 (1) for not reducing flat prices, leading to profiteering.

Issue 3: Liability for penalty under Section 171 (3A)
The Respondent was notified of potential penalty under Section 171 (3A) for profiteering and was given a chance to explain. The Respondent argued against penalty imposition citing the retrospective nature of the penalty provisions effective from 01.01.2020, while the investigation period ended on 31.12.2018. The DGAP confirmed the passing on of ITC benefits to buyers. As no penalty provisions existed during the violation period, the penalty under Section 171 (3A) could not be imposed retroactively. Consequently, the penalty proceedings against the Respondent were withdrawn.

In conclusion, the Authority found the Respondent guilty of not passing on ITC benefits to buyers, determined the profiteered amount, and acknowledged the passing on of benefits to buyers. The withdrawal of penalty proceedings due to the absence of penalty provisions during the violation period highlighted the retrospective limitation on penalty imposition.