2020 (11) TMI 384 - NAPA - GST

Profiteering - Respondent had not passed on the benefit of additional Input tax Credit - violation of the provisions of Section 171 (1) of CGST Act - Penalty - HELD THAT - Respondent has not passed on the benefit of additional Input tax Credit (ITC) to the above Applicant as well as other buyers who had purchased flats from the Respondent during 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 - 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 invoice while charging excess consideration and GST from the buyers. However, from the perusal of Section 122 (1) (i) it is clear that the violation of the provisions of Section 171 (1) is not covered under it as it does not provide penalty for not passing on the benefits of tax reduction and ITC and hence the above penalty cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the above Act. 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the notice dated 01.04.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.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 the CGST Act, 2017 regarding passing on benefits of Input Tax Credit (ITC) to buyers. Imposition of penalty under Section 122 (1) (i) of the CGST Act, 2017 for non-compliance with anti-profiteering provisions.

Analysis:
1. The case involved a complaint where the Respondent was alleged to have not passed on the benefit of additional Input Tax Credit (ITC) to buyers as per Section 171 (1) of the CGST Act, 2017. The Directorate General of Anti-Profiteering (DGAP) conducted an investigation and found that the Respondent had denied ITC benefits amounting to a specific sum during a defined period.

2. The National Anti-Profiteering Authority issued a notice to the Respondent to show cause for non-compliance with Section 171 (1) based on the DGAP's report. After a thorough hearing, the Authority determined the profiteered amount and held the Respondent in violation of Section 171 (1) as per the provisions of the CGST Act, 2017.

3. The Authority found that the Respondent's actions constituted an offense under Section 122 (1) (i) of the CGST Act, 2017 for not passing on additional ITC benefits. Consequently, the Respondent was liable for penalty imposition as per the relevant provisions of the Act.

4. The Respondent was given an opportunity to explain why penalties should not be imposed. The Respondent argued against penalty imposition, citing compliance with the Authority's previous order as evidence of good faith and lack of deliberate violation of the law.

5. Upon reviewing the submissions and evidence, the Authority confirmed that the Respondent indeed failed to pass on the ITC benefits to buyers, thus violating Section 171 (1) of the CGST Act, 2017. However, it was noted that no specific penalty was prescribed for this violation under the existing legal framework.

6. The Authority highlighted that penalty provisions for violations of Section 171 (1) were introduced under Section 112 of the Finance Act, 2019, effective from January 1, 2020. As the violations occurred prior to this amendment, retrospective imposition of penalties under Section 171 (3A) was deemed inappropriate.

7. Consequently, the Authority withdrew the penalty notice issued to the Respondent under Section 122 (1) (i) as penalties under Section 171 (3A) could not be applied retrospectively. The penalty proceedings against the Respondent were dropped, and the order was shared with both parties for record purposes before closing the file.