2021 (1) TMI 173 - NAPA - GST

Profiteering - supplies of HP 678 LOS24AA Combo, Pack Ink Advantage Cartridges (Black Tricolors) BOOUHG8BFI - allegation that the benefit of reduction in the rate of tax 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 GST rate from 28% to 18% on the above products w.e.f. 15.11.2017 to 31.07.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. It is also revealed from the perusal of the CGST Act and the Rules framed under it that no penalty had been prescribed for violation of the provisions of Section 171 (1) of the above Act, therefore, the Respondent was issued show cause notice to state why penalty should not be imposed on him for violation of the above provisions as per Section 122 (1) (i) of the above Act as he had apparently issued incorrect or false invoices while charging excess consideration and GST from the buyers. However, from the perusal of Section 122 (1) (i) of the CGST Act, 2017, it is clear that the violation of the provisions of Section 171 (1) is not covered under Section 122 (1) (i) of the CGST Act, 2017 as it does not provide penalty for not passing on the benefits of tax reduction and ITC and hence the penalty prescribed under Section 122 cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the above Act. Since, no penalty provisions were in existence between the period w.e.f. 15.11.2017 to 31.07.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) can not be imposed on the Respondent retrospectively. Accordingly, the notice dated 11.03,2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.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:
1. Violation of Section 171(1) of the CGST Act, 2017 by not passing on the benefit of tax reduction to recipients.
2. Determination of profiteered amount and imposition of penalty under Section 171(1) and Section 122(1)(i) of the CGST Act, 2017.
3. Challenge to the order and penalty proceedings through a writ petition before the High Court of Delhi.
4. Applicability of penalty provisions under Section 171(3A) of the Finance Act, 2019 retrospectively.

Analysis:
Issue 1: The case involved a violation of Section 171(1) of the CGST Act, 2017, where the Respondent failed to pass on the benefit of a GST rate reduction from 28% to 18% on specific products to the recipients. The investigation revealed that the Respondent had not transferred the reduced tax rate benefits amounting to ?10,79,813.28 to the consumers, thus engaging in profiteering.

Issue 2: After careful consideration, the Anti-Profiteering Authority determined the profiteered amount and found the Respondent in violation of Section 171(1). Additionally, it was established that the Respondent had collected extra amounts from consumers and forced them to pay more GST, leading to an offense under Section 122(1)(i) of the CGST Act, 2017. Consequently, penalty proceedings were initiated against the Respondent.

Issue 3: The Respondent, in response to the penalty proceedings, cited a writ petition filed before the High Court of Delhi challenging the order. However, the Authority considered the Respondent's submissions but maintained that the violation of Section 171(1) did not fall under the penalty provisions of Section 122(1)(i) as it did not address the failure to pass on tax benefits.

Issue 4: The Authority highlighted the introduction of specific penalty provisions under Section 171(3A) of the Finance Act, 2019, effective from January 1, 2020, for violations of Section 171(1). As the violation occurred prior to the enactment of these penalty provisions, the Authority concluded that retrospective imposition of penalties under Section 171(3A) was not applicable. Consequently, the penalty proceedings initiated under Section 122(1)(i) were withdrawn, and no penalty was imposed on the Respondent for the violation of Section 171(1).