Input Tax Credit profiteering must be passed on to buyers, but penalty cannot apply before a provision comes into force.

Where additional Input Tax Credit benefit was not fully passed on to 149 eligible homebuyers up to receipt of the Occupancy Certificate, the profiteering was quantified on the accepted investigation methodology and the remaining amount was directed to be refunded with interest at 18% per annum under Rule 133(3)(b). Penalty under Section 171(3A) was declined because the alleged contravention had ended before that penal provision became operative on 01.01.2020; a penalty provision cannot apply retrospectively to conduct fully completed earlier.

---

---

Issues: (i) whether the respondent had contravened Section 171 of the Central Goods and Services Tax Act, 2017 by not passing on the benefit of Input Tax Credit to the eligible homebuyers and was liable to refund the remaining profiteered amount with interest; (ii) whether penalty was leviable under Section 171(3A) of the Central Goods and Services Tax Act, 2017 for a contravention that concluded before the provision came into force.

Issue (i): Whether the respondent had contravened Section 171 of the Central Goods and Services Tax Act, 2017 by not passing on the benefit of Input Tax Credit to the eligible homebuyers and was liable to refund the remaining profiteered amount with interest.

Analysis: The respondent accepted the investigation report and the methodology adopted for quantifying profiteering. The Tribunal accepted the report, held that the benefit of additional Input Tax Credit had not been fully passed on to 149 eligible homebuyers for the relevant period up to the receipt of the Occupancy Certificate, and held that the remaining amount had to be refunded with interest at 18% per annum under Rule 133(3)(b) of the Central Goods and Services Tax Rules, 2017.

Conclusion: The issue was decided against the respondent and in favour of the Revenue. The respondent was held liable to refund the remaining profiteered amount of Rs. 11,13,155/- with interest.

Issue (ii): Whether penalty was leviable under Section 171(3A) of the Central Goods and Services Tax Act, 2017 for a contravention that concluded before the provision came into force.

Analysis: The period of contravention had ended on 22.11.2019, whereas Section 171(3A) became operative from 01.01.2020. As the alleged contravention was fully complete before the penalty provision came into force, the provision was held inapplicable.

Conclusion: The issue was decided in favour of the respondent. No penalty was leviable under Section 171(3A) of the Central Goods and Services Tax Act, 2017.

Final Conclusion: The profiteering report was accepted, refund with interest was directed, and penalty was declined for want of temporal applicability of the penal provision.

Ratio Decidendi: A penalty provision cannot be applied to a contravention that was fully completed before the provision came into force, and profiteered Input Tax Credit benefits must be passed on with interest where the statutory obligation is established.

---