2020 (11) TMI 231 - NAPA - GST

Profiteering - purchase of Flat - allegation that Respondent had not passed on the benefit of additional Input tax Credit b y way of commensurate reduction in price - contravention of provisions of Section 171 (1) of of CGST Act - Penalty - HELD THAT - It has been revealed that the Respondent had not passed on the benefit of additional Input tax Credit (ITC) to the Applicants as well as other home buyers who had purchased them in his Project Nirala Greenshire for 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. 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the notice dated 04.02.2020 issued to the Respondent for imposition of penalty under Section 177 (3A) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.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 - Benefit of additional Input Tax Credit not passed on to home buyers
Imposition of penalty under Section 171(3A) of the CGST Act, 2017

Analysis:
1. The case involved a complaint by multiple applicants against the respondent for not passing on the benefit of additional Input Tax Credit (ITC) to home buyers who had purchased properties in the project "Nirala Greenshire" between July 2017 and December 2018, violating Section 171(1) of the CGST Act, 2017. The Directorate General of Anti-profiteering (DGAP) conducted an investigation and determined that the respondent had denied ITC benefits amounting to ?2,88,43,422 to the buyers, leading to profiteering.

2. After careful consideration, the Anti-profiteering Authority issued a notice to the respondent to show cause why the DGAP's report should not be accepted. Following a detailed hearing, the Authority determined the profiteered amount as ?2,88,43,422 under Section 171(2) of the Act for the period from July 2017 to December 2018. The respondent was found in violation of Section 171(1) for not passing on the ITC benefits to the buyers.

3. The Authority held that the respondent's actions constituted an offense under Section 171(3A) of the CGST Act, 2017, making him liable for penalty imposition. Subsequently, a notice was issued to the respondent to explain why the penalty under Section 171(3A) should not be imposed. The respondent argued against the penalty, citing the non-retrospective applicability of Section 171(3A) effective from January 1, 2020.

4. Upon reviewing the respondent's submissions and relevant provisions, the Authority acknowledged the non-existence of penalty provisions during the period of violation (July 2017 to December 2018). As Section 171(3A) came into force on January 1, 2020, the Authority concluded that retrospective imposition of penalty was not permissible. Consequently, the penalty proceedings against the respondent were withdrawn, and the notice for penalty imposition was dropped.

5. The decision highlighted the importance of aligning penalty provisions with the effective date of relevant legal amendments, ensuring that penalties are not imposed retrospectively. The Authority's ruling emphasized the legal principle of non-retrospective application of penalty provisions and the need for compliance with the specific effective dates outlined in legislative notifications.