2020 (11) TMI 955 - NAPA - GST

Profiteering - Respondent had not passed on the benefit of rate reduction to the Applicant as well as other Customers as per the provisions of Section 171 (1) of the CGST Act, 2017 - HELD THAT - It has been revealed that the Respondent had not passed on the benefit of rate reduction to the above Applicant as well as other Customers for the period from 15.11.2017 to 31.10.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. 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 invoices 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 benefit of rate reduction 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. 15.11.2017 to 31.10.2018 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the notice dated 08.05.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.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
Imposition of penalty under Section 122 (1) (i) of the CGST Act, 2017

Analysis:
1. The case involved a complaint by Applicant No. 1 against the Respondent for not passing on the benefit of rate reduction to customers as required by Section 171 (1) of the CGST Act, 2017. The Director General of Anti-Profiteering (DGAP) conducted an investigation and found that the Respondent had denied the benefit amounting to ?9,75,078 between 01.11.2017 to 31.08.2018, thus violating Section 171 (1).

2. The Anti-Profiteering Authority issued a notice to the Respondent to explain the findings. After hearing both parties, the Authority determined the profiteered amount as ?9,75,078 and held the Respondent in violation of Section 171 (1) as per Order No. 29/2019 dated 06.05.2019. Additionally, the Respondent was found to have committed an offence under Section 122 (1) (i) of the CGST Act, 2017, warranting imposition of penalty.

3. The Respondent was subsequently issued a notice to show cause why penalty under Section 122 should not be imposed. In response, the Respondent argued against penalty imposition, stating compliance with the Authority's order demonstrated good faith and lack of mens rea for deliberate violation. However, the Authority found that the Respondent indeed failed to pass on the benefit, constituting a violation of Section 171 (1).

4. It was noted that at the time of the violation (01.11.2017 to 31.08.2018), there were no specific penalty provisions for Section 171 (1) under the CGST Act. The Authority withdrew the penalty notice issued under Section 122 (1) (i) as it did not cover the violation related to anti-profiteering. The introduction of penalty provisions under Section 171 (3A) from 01.01.2020 meant retrospective imposition was not feasible.

5. Consequently, the penalty proceedings against the Respondent were dropped, as retrospective application of the penalty provisions introduced under Section 171 (3A) was not permissible. The Authority clarified the absence of penalty provisions during the period of violation precluded retrospective penalties. The order was to be supplied to both parties, and the file was to be closed upon completion.