Anti-profiteering penalty cannot operate retrospectively; a later penalty provision was held inapplicable for the earlier period.

The authority found that the respondent had not passed on the benefit of input tax credit to buyers during the relevant period, thereby breaching the anti-profiteering mandate. However, it held that no penalty was prescribed under the CGST Act and Rules for that violation at the relevant time, and Section 122(1)(i) did not apply because it did not cover failure to pass on tax reduction or input tax credit benefits. The later insertion of Section 171(3A) by the Finance Act, 2019 was held to be prospective only, so it could not be used for an earlier period. Penalty was therefore not imposable, the notice was withdrawn, and the proceedings were dropped.

---

---

Issues: Whether penalty could be imposed for alleged violation of the anti-profiteering obligation by not passing on the benefit of input tax credit, and whether the penalty provision inserted later could be applied retrospectively.

Analysis: The authority found that the respondent had not passed on the benefit of input tax credit to the buyers during the relevant period and had thereby violated the anti-profiteering mandate. It further held that no penalty was prescribed in the CGST Act and Rules for such violation at the relevant time. The proposed reliance on Section 122(1)(i) of the Central Goods and Services Tax Act, 2017 was rejected because that provision did not cover failure to pass on tax reduction or input tax credit benefits. The later insertion of Section 171(3A) by Section 112 of the Finance Act, 2019, which introduced a specific penalty, was held to operate only prospectively and could not be invoked for an earlier period.

Conclusion: Penalty could not be imposed for the alleged anti-profiteering violation for the relevant period, and the penalty notice was withdrawn and the proceedings dropped.

Ratio Decidendi: A penal provision cannot be applied retrospectively in the absence of an express legislative mandate, and a general penalty clause cannot be used to punish a specific anti-profiteering breach not covered by that clause.

---