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2020 (8) TMI 369 - NAPA - GSTProfiteering - purchase of flat - allegation that the benefit of reduction in the rate of tax not passed on by way of commensurate reduction of price - contravention of 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 additional ITC to the buyers of his flats/plots w.e.f. 01.07.2017 to 31.08.2018 which he was required to pass on every month as he was availing the benefit of ITC every month to discharge his GST liability. It is also revealed that he has passed on the above benefit in the month of February, 2019 as is evident from the details furnished by him vide his submissions dated 11.02.2019, after this Authority had initiated proceedings against the Respondent vide its notice dated 07.12.2018. Therefore, there is no doubt that the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT - 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 above Act as he had apparently issued incorrect or false invoice while charging excess consideration and GST from the buyers - It is apparent from the perusal of Section 122 (1) (i) 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 tax reduction and ITC. It only provides for imposition of penalty for not issuing an invoice or for issuing an incorrect or false invoice in respect of any supply of goods or services or both Since, the profiteered amount is not a tax imposed under the CGST Act, 2017, 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. 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) can not be imposed on the Respondent retrospectively. Accordingly, the notice dated 27.05.2019 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.
Issues Involved:
1. Non-passing of benefit of additional Input Tax Credit (ITC) to buyers. 2. Determination of profiteered amount. 3. Imposition of penalty for violation of anti-profiteering provisions. 4. Interpretation of legal provisions regarding penalty imposition. Detailed Analysis: 1. Non-passing of benefit of additional Input Tax Credit (ITC) to buyers: The Applicant No. 2 (DGAP) submitted a report on 28.11.2018, indicating that the Respondent had not passed on the benefit of additional ITC to 125 buyers, including Applicant No. 1, as required by Section 171 (1) of the CGST Act, 2017. The Respondent was found to have denied ITC benefits amounting to ?41,82,198/- for the period from 01.07.2017 to 31.08.2018, thereby indulging in profiteering. 2. Determination of profiteered amount: After reviewing the DGAP's report, the Authority issued a notice to the Respondent on 07.12.2018 to show cause why the report should not be accepted. The Authority, in its Order No. 34/2019 dated 24.05.2019, determined the profiteered amount as ?41,82,198/- for the specified period and confirmed the violation of Section 171 (1). The Respondent accepted the findings and provided details of the ITC benefit passed on to the buyers, including the Applicant No. 1, amounting to ?59,57,306/- by 31.01.2019. 3. Imposition of penalty for violation of anti-profiteering provisions: The Authority observed that the Respondent had passed on the ITC benefits only after the initiation of proceedings, indicating a deliberate violation of Section 171 of the CGST Act, 2017. Consequently, the Respondent was liable for a penalty under Section 122 (1) (i) of the CGST Act, 2017. A notice was issued to the Respondent on 27.05.2019 for the imposition of the penalty. 4. Interpretation of legal provisions regarding penalty imposition: The Respondent argued against the imposition of the penalty, citing a bona fide belief in compliance with Section 171 and the absence of prescribed methodology for calculating the ITC benefits at the time. The Respondent referenced the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which emphasized that penalties should not be imposed for technical or venial breaches or where there is a bona fide belief in compliance. The Authority considered the Respondent's arguments and noted that no penalty provisions were in place for violations of Section 171 (1) during the relevant period (01.07.2017 to 31.08.2018). Section 171 (3A), introduced by the Finance Act, 2019, which provides for penalties, came into force on 01.01.2020 and cannot be applied retrospectively. Therefore, the notice for penalty imposition under Section 122 (1) (i) was withdrawn, and the penalty proceedings were dropped. Conclusion: The Authority concluded that the Respondent violated Section 171 (1) by not passing on the ITC benefits timely but could not impose a penalty retrospectively due to the absence of specific penalty provisions during the period of violation. The penalty proceedings were thus withdrawn, and the case was closed.
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