2021 (1) TMI 417 - 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 reduction in IGST rate on the above products and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Since, no penalty provisions were in existence when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) can not be imposed on the Respondent retrospectively. Accordingly, the notice dated 06.12.2018 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped. Application disposed off.

Summary

Issues:
Violation of Section 171 (1) of CGST Act, 2017; Imposition of penalty under Section 122 (1) (i) of CGST Act, 2017; Applicability of penalty provisions under Section 171 (3A) of Finance Act, 2019.

Violation of Section 171 (1) of CGST Act, 2017:
The case involved a complaint where the Respondent was alleged to have not passed on the benefit of a tax rate reduction to recipients on the purchase of specific items. The investigation found that the Respondent had denied the benefit to recipients, amounting to a specific sum, thus violating Section 171 (1) of the CGST Act, 2017. The Anti-Profiteering Authority issued a notice to the Respondent, who was given an opportunity to explain the situation. After due consideration, the Authority determined the profiteered amount and held the Respondent in violation of Section 171 (1), as per the provisions of the Act and relevant rules.

Imposition of penalty under Section 122 (1) (i) of CGST Act, 2017:
The Respondent was also found to have collected an extra amount from consumers on the products, leading to additional IGST payments. This action was deemed an offense under Section 122 (1) (i) of the CGST Act, 2017, warranting the imposition of a penalty. Subsequently, the Respondent was issued a notice to explain why the penalty should not be imposed. In response, the Respondent argued against the imposition of the penalty, citing compliance with the Authority's previous order and asserting lack of mens rea or deliberate violation of the law. However, the Authority noted that the penalty provisions under Section 122 did not cover violations of Section 171 (1) related to anti-profiteering measures.

Applicability of penalty provisions under Section 171 (3A) of Finance Act, 2019:
The Authority highlighted that specific penalty provisions for violations of Section 171 (1) were introduced under Section 171 (3A) of the Finance Act, 2019, effective from January 1, 2020. As the Respondent's violation occurred before the enactment of these penalty provisions, the retrospective imposition of penalties under Section 171 (3A) was deemed inappropriate. Consequently, the penalty proceedings initiated under Section 122 (1) (i) were withdrawn, and the penalty against the Respondent was dropped. The Authority concluded by directing the supply of the order to both parties and the closure of the file.

This detailed analysis of the judgment outlines the violations, penalty considerations, and the application of penalty provisions under the relevant legal framework, providing a comprehensive overview of the case.