2020 (10) TMI 1055 - NAPA - GST

Profiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of additional Input tax Credit - violation of provisions of Section 171 (1) of the CGST Act, 2017 - penalty - HELD THAT - It has been revealed that the Respondent had not passed on the benefit of additional Input tax Credit (ITC) to the Applicant No. 1 as well as other homebuyers who had purchased flats in his Project Orchard Avenue-93 during the period from 01.07.2017 to 31.12.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. It is also revealed that vide Section 112 of the Finance Act, 2019 specific penalty provisions have been added for violation of the provisions of Section 171 (1) of the CGST Act, 2017 which have come in to force w.e.f. 01.01.2020 vide Notification No. 01/2020-Central Tax dated 01.01.2020, by inserting Section 171 (3A) in the CGST Act, 2017. 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.

Summary

Issues: Violation of Section 171(1) of CGST Act, 2017; Determination of profiteered amount; Imposition of penalty under Section 171(3A)

Violation of Section 171(1) of 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 additional Input Tax Credit (ITC) to the homebuyers as required by Section 171(1) of the CGST Act, 2017. The DGAP's report highlighted that the Respondent denied ITC benefits to the buyers, amounting to a significant sum, during the period from 01.07.2017 to 31.12.2018. Subsequently, the Anti-Profiteering Authority issued a notice to the Respondent to explain the findings and show cause as to why the report should not be accepted. After due consideration and a hearing, the Authority determined the profiteered amount and held the Respondent in violation of Section 171(1) of the CGST Act, 2017.

Determination of Profiteered Amount:
Following the investigation and hearings, the Anti-Profiteering Authority, through its order, quantified the profiteered amount at the sum previously identified by the DGAP, which was &8377; 2,58,80,9271-. This determination was made in accordance with Section 171(2) of the CGST Act, 2017 read with Rule 133(1) of the CGST Rules, 2017, covering the period from 01.07.2017 to 31.12.2018. The Authority's decision was based on a thorough assessment of the evidence and submissions presented by both parties during the proceedings.

Imposition of Penalty under Section 171(3A):
Subsequently, the Respondent was issued a notice regarding the imposition of a penalty under Section 171(3A) of the CGST Act, 2017 read with Rule 133(3)(d) of the CGST Rules, 2017 for the violation of Section 171(1). The Respondent, in response, indicated compliance with the order by initiating the process of transferring ITC benefits to the buyers but failed to provide evidence of having done so. The Authority acknowledged the Respondent's actions but noted the absence of proof of benefit transfer. Considering the penalty provisions introduced under Section 112 of the Finance Act, 2019, effective from 01.01.2020, the Authority concluded that retrospective imposition of penalties for the period of violation (01.07.2017 to 31.12.2018) was not feasible. Consequently, the penalty proceedings against the Respondent were withdrawn, and the notice for penalty imposition was retracted.

In conclusion, the Anti-Profiteering Authority found the Respondent in violation of Section 171(1) of the CGST Act, 2017 for not passing on the ITC benefits to the homebuyers, determined the profiteered amount, and decided against imposing penalties retrospectively due to the absence of penalty provisions during the period of violation.