Anti-profiteering penalty under GST could not rest on Section 122(1)(i), and later penalty provisions were non-retrospective.

Anti-profiteering non-compliance for failure to pass on the benefit of a GST rate reduction was treated as outside Section 122(1)(i), because that provision did not expressly cover breach of Section 171(1). The later penalty inserted by Section 171(3A) through the Finance Act, 2019, effective from 01.01.2020, could not be applied to an earlier alleged profiteering period. As a result, the proposed penalty notice was withdrawn and penalty proceedings were dropped, leaving no surviving penal liability.

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Issues: (i) Whether penalty could be imposed under Section 122(1)(i) of the Central Goods and Services Tax Act, 2017 for failure to pass on the benefit of reduction in GST rate under Section 171(1). (ii) Whether the penalty introduced by insertion of Section 171(3A) could be applied retrospectively to the earlier period of alleged profiteering.

Issue (i): Whether penalty could be imposed under Section 122(1)(i) of the Central Goods and Services Tax Act, 2017 for failure to pass on the benefit of reduction in GST rate under Section 171(1).

Analysis: The order held that the anti-profiteering violation of not passing on the benefit of tax reduction was not covered by Section 122(1)(i), which deals with different defaults and does not expressly provide a penalty for breach of Section 171(1). Since the statutory framework then in force did not prescribe a separate penalty for such non-compliance, the proposed penalty under Section 122(1)(i) was not sustainable.

Conclusion: Penalty under Section 122(1)(i) could not be imposed for the alleged violation of Section 171(1).

Issue (ii): Whether the penalty introduced by insertion of Section 171(3A) could be applied retrospectively to the earlier period of alleged profiteering.

Analysis: The order noted that the specific penalty provision for violation of Section 171(1) was introduced later by Section 112 of the Finance Act, 2019 through insertion of Section 171(3A), effective from 01.01.2020. As the alleged violation related to an earlier period, the new penal provision could not be applied retrospectively.

Conclusion: The penalty under Section 171(3A) could not be applied retrospectively.

Final Conclusion: The notice proposing penalty was withdrawn and the penalty proceedings were dropped, leaving no surviving penal liability in the matter.

Ratio Decidendi: A penalty cannot be imposed for anti-profiteering non-compliance unless a specific penal provision exists, and a subsequently inserted penal provision cannot be applied retrospectively to an earlier period.

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