2020 (9) TMI 99 - NAPA - GST

Profiteering - purchase of flat - allegation that the benefit ITC not passed to be buyers - contravention of section 171 of CGST 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 31.12.2018 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 31.12.2018 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the notice dated 17.01.2020 issued to the Respondent for imposition of penalty under Section 171 (3A) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

Summary

Issues:
Violation of Section 171 (1) of the CGST Act, 2017
Imposition of penalty under Section 171 (3A) of the CGST Act, 2017

Analysis:

Violation of Section 171 (1) of the CGST Act, 2017:
The case involved an investigation by the DGAP based on complaints from multiple applicants regarding the Respondent's failure to pass on the benefit of input tax credit (ITC) on flats purchased post-GST implementation. The DGAP's report highlighted that the Respondent did not transfer ITC benefits to buyers, amounting to a substantial sum. Consequently, the National Anti-Profiteering Authority issued a notice to the Respondent to explain the findings and show cause for not accepting the DGAP's report. Following thorough deliberation and hearings, the Authority determined the profiteered amount and held the Respondent in violation of Section 171 (1) of the CGST Act, 2017. It was established that the Respondent had not reduced prices of flats to reflect the benefit of ITC, leading to buyers paying more than necessary, thereby contravening the provisions of the Act.

Imposition of penalty under Section 171 (3A) of the CGST Act, 2017:
Subsequently, the Authority found that the Respondent's actions amounted to an offense under Section 171 (3A) of the CGST Act, 2017, as he denied ITC benefits to buyers and compelled them to pay additional amounts including GST. The Respondent was issued a notice to explain why the penalty specified under Section 171 (3A) should not be imposed. In response, the Respondent argued against the retrospective application of the penalty provisions, citing a notification by the Central Government. After careful consideration, the Authority acknowledged the non-existence of penalty provisions during the period of violation (July 2017 to December 2018) and concluded that the penalty prescribed under Section 171 (3A) could not be applied retrospectively. Consequently, the penalty proceedings against the Respondent were withdrawn, and the case was closed.

In conclusion, the judgment addressed the violation of Section 171 (1) of the CGST Act, 2017 by the Respondent and the subsequent consideration of imposing a penalty under Section 171 (3A). The decision highlighted the importance of adherence to legal provisions and the limitations on retrospective application of penalties, ultimately leading to the withdrawal of penalty proceedings against the Respondent.