2020 (9) TMI 37 - NAPA - GST

Profiteering - Maggi Noodles Pack having MRP ₹ 5/- - allegation that the benefit of reduction in the rate of GST not passed on 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 reduction in the GST rate from 18% to 12% on the above product w.e.f 15.11.2017 to 28.02.2018 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. 15.11.2017 to 31.03.2018 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the notice dated 10.10.2018 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.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:
Violation of Section 171(1) of the CGST Act, 2017 - Passing on benefits of tax reduction, Imposition of penalty under Section 122(1)(i) of the CGST Act, 2017, Applicability of penalty provisions for violation of Section 171(1) retrospectively.

Analysis:

1. The case involved a complaint regarding the Respondent's failure to pass on the benefit of reduced GST rates from 18% to 12% on a specific product. The DGAP's investigation found that the Respondent did not pass on the benefit, resulting in profiteering and violation of Section 171(1) of the CGST Act, 2017.

2. The Anti-Profiteering Authority issued a notice to the Respondent after considering the DGAP's report. In its previous order, the Authority determined the profiteered amount and held the Respondent in violation of Section 171(1) of the Act, imposing liability accordingly.

3. It was established that the Respondent's actions amounted to an offense under Section 122(1)(i) of the CGST Act, 2017, as he denied the benefit of tax rate reduction to buyers and compelled them to pay more. The Respondent was liable for penalty under this section.

4. The Respondent was given an opportunity to explain why penalty should not be imposed, to which he submitted that penalty provisions for violation of Section 171 were not explicitly provided. He argued against the imposition of penalty citing compliance with the Authority's order and lack of mens rea.

5. After reviewing the Respondent's submissions and relevant materials, the Authority confirmed that the Respondent indeed violated Section 171(1) by not passing on the GST rate reduction benefit.

6. However, it was noted that no penalty was prescribed for violating Section 171(1) during the relevant period. The Authority withdrew the penalty notice issued under Section 122(1)(i) as it did not cover the specific violation related to anti-profiteering.

7. The introduction of penalty provisions under Section 171(3A) of the Finance Act, 2019, effective from 01.01.2020, addressed penalties for violations of Section 171(1). As these provisions were not in force during the violation period, retrospective imposition of penalties was deemed inappropriate.

8. Consequently, the penalty proceedings against the Respondent were dropped, and the notice for penalty imposition was withdrawn. The Authority clarified the absence of penalty provisions during the violation period as the basis for this decision.

9. The order was directed to be shared with both parties, and the case file was to be closed upon completion of the proceedings.