2020 (12) TMI 1203 - 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 - penalty - HELD THAT - It has been revealed that the Respondent has not passed on the benefit of rate reduction to the above Applicant as well as other customers who had purchased various items from him during the period from 15.11.2017 to 31.01.2018 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 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 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) was 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 Act. Since, no penalty provisions were in existence between the period w.e.f. 15.11.2017 to 31.01.2018 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the notice dated 01.10.2018 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

Issues:
1. Violation of Section 171(1) of the CGST Act, 2017 by not passing on the benefit of rate reduction.
2. Determination of profiteered amount.
3. Imposition of penalty under Section 122(1)(i) of the CGST Act, 2017.
4. Respondent's defense against penalty imposition.
5. Applicability of penalty provisions under Section 171(3A) of the Finance Act, 2019 retrospectively.

Analysis:
1. The case involved a complaint where the Respondent was alleged to have not passed on the benefit of rate reduction to customers as required by Section 171(1) of the CGST Act, 2017. The DGAP's investigation revealed a profiteered amount of ?15,861 from 15.11.2017 to 31.01.2018, leading to a finding of violation of Section 171(1) by the Respondent.

2. The Anti-Profiteering Authority issued a notice to the Respondent based on the DGAP's report and after hearing both parties, determined the profiteered amount to be ?15,861 as per Section 171(2) of the Act. The Respondent was found to have not passed on the benefit of rate reduction during the specified period, leading to a violation of Section 171(1) of the CGST Act, 2017.

3. Subsequently, the Authority held that the Respondent's actions amounted to an offense under Section 122(1)(i) of the CGST Act, 2017 due to incorrect or false invoices issued, warranting the imposition of a penalty. The Respondent was issued a notice to explain why the penalty should not be imposed on him under Section 122 of the Act read with Rule 133(3)(d) of the CGST Rules, 2017.

4. In response to the penalty notice, the Respondent argued against the imposition of the penalty, stating that he had cooperated with the investigation, acted in good faith, and passed on the benefit of reduced GST to customers. The Respondent contended that penalties should only be imposed in cases of mens rea and deliberate violation of the law.

5. Upon careful consideration, the Authority found that no penalty provisions existed for the violation of Section 171(1) during the relevant period. It was noted that Section 122(1)(i) did not cover the failure to pass on rate reduction benefits. The introduction of penalty provisions under Section 171(3A) of the Finance Act, 2019, effective from 01.01.2020, did not apply retrospectively to the Respondent's actions from 15.11.2017 to 31.01.2018. As a result, the penalty proceedings initiated against the Respondent were withdrawn, and no penalty was imposed.

In conclusion, the judgment highlighted the importance of complying with anti-profiteering provisions, the determination of profiteered amounts, and the limitations on retrospective application of penalty provisions, providing a comprehensive analysis of the issues involved in the case.

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