Anti-Profiteering Authority finds violation under CGST Act, 2017

The Anti-Profiteering Authority found the Respondent in violation of Section 171(1) of the CGST Act, 2017 for not passing on Input Tax Credit benefits to homebuyers. The Authority determined the profiteered amount to be 2,58,80,927 covering the period from 01.07.2017 to 31.12.2018. Although a penalty was initially considered, it was withdrawn due to the lack of evidence of benefit transfer and the retrospective nature of penalty provisions introduced after the violation period.

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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.

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