2020 (8) TMI 621 - NAPA - GST

Profiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of Input Tax Credit by way of commensurate reduction in price - contravention of section 171 of CGST Act - penalty - HELD THAT - It has been revealed that the Respondent has not passed on the benefit of input tax credit to his buyers w.e.f 01.07.2017 to 30.06.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT - Since no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 30.03.2018 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the notice dated 18.12.2019 issued to the Respondent for imposition of penalty under Section 171 (3A) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

Summary

Issues:
1. Violation of Section 171 (1) of the CGST Act, 2017 by not passing on the benefit of Input Tax Credit.
2. Imposition of penalty under Section 171 (3A) of the CGST Act, 2017 for profiteering and violation of Section 171 (1).

Issue 1: Violation of Section 171 (1) of the CGST Act, 2017
The case involved an investigation by the DGAP based on a complaint where it was found that the Respondent did not pass on the benefit of Input Tax Credit to buyers for a flat purchased in a project post-GST introduction. The DGAP reported a denial of input tax credit amounting to ?3,20,49,507 from July 2017 to June 2018, leading to profiteering and violation of Section 171 (1) of the CGST Act, 2017.

Issue 2: Imposition of penalty under Section 171 (3A) of the CGST Act, 2017
The National Anti-Profiteering Authority issued a notice to the Respondent to explain the denial of input tax credit and violation of Section 171 (1). After due consideration and hearings, the Authority determined the profiteered amount and held the Respondent in violation of Section 171 (1) and Section 171 (3A) of the CGST Act, 2017. The Respondent was asked to show cause why the penalty under Section 171 (3A) should not be imposed.

The Respondent argued against the imposition of penalty citing the prospective enforcement of Section 171 (3A) from January 1, 2020, as per Notification No. 01/2020. The Respondent contended that penalties should not be retroactively applied and should only be imposed in cases of mens rea and deliberate violations of the law. However, upon review of the submissions and relevant provisions, the Authority found that the Respondent indeed violated Section 171 (1) by not passing on the input tax credit.

The Authority noted that penalty provisions under Section 171 (3A) were not in effect during the period when the violation occurred (July 2017 to June 2018). As a result, the penalty could not be imposed retrospectively. Consequently, the notice for penalty imposition was withdrawn, and the penalty proceedings against the Respondent were dropped.

In conclusion, the National Anti-Profiteering Authority found the Respondent guilty of violating Section 171 (1) of the CGST Act, 2017 but could not impose a penalty under Section 171 (3A) retrospectively due to the absence of penalty provisions during the relevant period.