GSTAT Orders Profiteering Amount Rs. 13.32 Lakh to Be Deposited in Consumer Welfare Funds

The Director General of Anti-Profiteering (DGAP) conducted an investigation against M/s. A J Enterprises for the period from November 15, 2017, to September 30, 2019. The investigation was triggered to determine if the Respondent had passed on the benefit of GST rate reductions to its customers.

The DGAP’s report concluded that the Respondent had indeed profiteered by not reducing the prices of its goods commensurate with the tax cuts. The matter was later brought before the GST Appellate Tribunal (GSTAT) for a final determination on the profiteered amount, interest, and potential penalties.

Main Issue: Whether the Respondent is liable to deposit the profiteered amount along with interest, and whether a penalty under Section 171(3A) of the CGST Act can be imposed retrospectively for an investigation period ending before the penalty provision came into force.

GSTAT’s Order: The GST Appellate Tribunal accepted the DGAP’s report and directed the Respondent to deposit the profiteered amount. The Tribunal ordered the Respondent to pay interest at the rate of 18% per annum, calculated from June 28, 2019, until the date of deposit. Following statutory requirements, 50% of this amount is to be deposited in the Central Consumer Welfare Fund, with the remaining 50% going to the respective State Consumer Welfare Fund.

The Tribunal ruled that the penalty under Section 171(3A) could not be imposed because the provision became effective on January 1, 2020, whereas the investigation period concluded on September 30, 2019. Relying on Vatika Township case, the Tribunal held that penal provisions cannot be applied retrospectively.

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