GSTAT: No Interest Payable on Profiteered Amount for Pre-Amendment Period under Rule 133(3)(c)

The case arose from an anti-profiteering investigation under Section 171 of the CGST Act concerning alleged non-passing of tax-rate benefits on sanitary napkins during July 2018 to October 2018. The respondent voluntarily agreed to deposit Rs. 6.88 lakh, contending that while the amount may be remitted to the Consumer Welfare Fund, no interest was payable since the clause imposing 18% interest under Rule 133(3)(c) was inserted later by Notification 31/2019 dated 28 June 2019 and made effective from 01 April 2020. It was urged that this amendment was prospective and could not be applied to transactions before its enforcement.

Issue Raised: Whether the provision imposing 18% interest on profiteered amounts under Rule 133(3)(c) operates retrospectively or only prospectively from the amendment date.

GSTAT’s Decision: The authority examined the chronology of notifications and amendments to Rule 133, as well as the judgment of the Supreme Court in Vatika Township Pvt Ltd, which held that statutes imposing new liabilities operate prospectively unless the legislative intent is clear to the contrary. The tribunal accepted that the obligation to pay interest on profiteered sums was a substantive levy introduced after June 2019 and could not be retrospectively imposed on earlier periods. The plea that the insertion was merely clarificatory was rejected, noting that the notification itself used the word “further,” indicating an addition rather than clarification.

The tribunal held that the amendment introducing 18% interest applies only prospectively from 28 June 2019. Since the alleged profiteering related to July-October 2018, no interest or penalty was leviable. The direction was confined to deposit of Rs. 6.88 lakh in the Consumer Welfare Funds of the Centre and States in equal proportion, with unallocated State shares to be credited temporarily to the Central Fund. The concerned commissioner was directed to report compliance within four months. The appeal was partly allowed; interest and penalty were set aside.

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