2020 (12) TMI 1204 - NAPA - GST

Purchase of flat - Vaseline VTM 400 ml - allegation that the Respondent had not passed on the benefit of reduction in the rate of tax to the Applicant by way of commensurate reduction in the price of the product - violation of the provisions of Section 171 (1) of CGST Act - Penalty - HELD THAT - It has been revealed that the Respondent had not passed on the benefit of reduction in the rate of tax to the Applicant No. 1 and other customers by way of commensurate reduction in the price of the product Vaseline VTM 400 ml for the period from 15.11.2017 to 31.01.2018and 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 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 reduction in the rate of tax and hence the above penalty cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the above Act. Penalty - HELD THAT - 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the notice dated 13.09.2018 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

Summary

Issues:
1. Failure to pass on the benefit of tax reduction to customers.
2. Violation of Section 171 (1) of the CGST Act, 2017.
3. Incorrect invoicing leading to denial of tax reduction benefits to customers.
4. Imposition of penalty under Section 122 (1)(i) of the CGST Act, 2017.
5. Applicability of penalty provisions for violation of Section 171 (1).
6. Retroactive imposition of penalty under Section 171 (3A) of the Finance Act, 2019.

Issue 1: The case involved the failure of the Respondent to pass on the benefit of a tax rate reduction to the Applicant and other customers, amounting to ?5,50,370, during the period from 15.11.2017 to 31.01.2018. The Director General of Anti-Profiteering (DGAP) conducted an investigation based on a complaint and found that the Respondent had engaged in profiteering by not reducing prices in line with the tax rate reduction, as required under Section 171 (1) of the CGST Act, 2017.

Issue 2: The National Anti-Profiteering Authority issued a notice to the Respondent after considering the DGAP's report, giving the Respondent an opportunity to show cause why the findings should not be accepted. Subsequently, the Authority determined the profiteered amount to be ?5,50,370 and held the Respondent in violation of Section 171 (1) of the CGST Act, 2017, based on Rule 133 (1) of the CGST Rules, 2017.

Issue 3: The Authority found that the Respondent had issued incorrect invoices by artificially increasing the base price to offset the reduced tax amount, thereby denying customers the benefit of the tax reduction. This practice was deemed an offense under Section 122 (1)(i) of the CGST Act, 2017, warranting the imposition of penalties under the relevant provisions.

Issue 4: Following the determination of violations, the Respondent was issued a notice to explain why penalties under Section 122 (1) of the Act should not be imposed. The Respondent submitted arguments against the imposition of penalties, claiming that the penal provisions were not applicable to the issue of profiteering.

Issue 5: The Authority carefully considered the Respondent's submissions and relevant provisions, concluding that while the Respondent had indeed violated Section 171 (1) of the CGST Act, 2017, no specific penalty had been prescribed for such violations under Section 122 (1). As a result, the Authority withdrew the penalty notice and dropped the penalty proceedings against the Respondent.

Issue 6: The Authority highlighted the introduction of specific penalty provisions under Section 171 (3A) of the Finance Act, 2019, effective from 01.01.2020, for violations of Section 171 (1). However, since the violations in this case occurred prior to the enactment of these penalty provisions, the Authority determined that retroactive imposition of penalties under Section 171 (3A) was not permissible, leading to the withdrawal of the penalty notice against the Respondent.