2021 (1) TMI 416 - NAPA - GST

Profiteering - purchase of flat - allegation that Respondent had not passed on the benefit of input tax credit by way of commensurate reduction in price - violation of the provisions of Section 171 (1) of GST Act - penalty - HELD THAT - It has been revealed that the Respondent has not passed on the benefit of ITC to his buyers w.e.f 01.07.2017 to 31.08.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. 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the notice dated 18.12.2020 issued to the Respondent for imposition of penalty under Section 171 (3A) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped. Application disposed off.

Summary

Issues:
Violation of Section 171(1) of the CGST Act, 2017 regarding passing on the benefit of input tax credit (ITC) to buyers.
Imposition of penalty under Section 171(3A) of the CGST Act, 2017 for non-compliance and profiteering.

Analysis:

Issue 1: Violation of Section 171(1) of the CGST Act, 2017
The case involved a complaint by Applicant No. 1 against the Respondent for not passing on the benefit of ITC in a specific project after the introduction of GST. The Directorate General of Anti-Profiteering (DGAP) conducted an investigation and found that the Respondent had indeed not passed on the ITC benefit to buyers, amounting to a significant sum. The National Anti-Profiteering Authority issued a notice to the Respondent to explain the findings and determined the profiteered amount as per the provisions of Section 171(2) of the CGST Act, 2017. The Authority concluded that the Respondent had violated Section 171(1) by denying the benefit of ITC to buyers, leading to increased prices and GST payments for the buyers.

Issue 2: Imposition of penalty under Section 171(3A) of the CGST Act, 2017
The Respondent was subsequently issued a notice to explain why the penalty under Section 171(3A) should not be imposed on him for the offense committed. The Respondent argued that the penal provisions should not be invoked as they were effective from 01.01.2020 onwards and could not have a retrospective effect. He contended that penalties should only apply in cases of mens rea and deliberate violation of the law. The Authority carefully considered the submissions and noted that the penalty provisions under Section 171(3A) were implemented from 01.01.2020, and therefore, could not be applied retrospectively to the period when the violation occurred (01.07.2017 to 31.08.2018). Consequently, the Authority withdrew the penalty notice and dropped the penalty proceedings against the Respondent.

In conclusion, the judgment highlighted the violation of Section 171(1) of the CGST Act, 2017 by the Respondent for not passing on the benefit of ITC to buyers. It also addressed the issue of imposing a penalty under Section 171(3A), ultimately deciding that the penalty provisions could not be applied retrospectively to the period in question.