2025 (3) TMI 361 - AAAR - GST

AAAR Gujarat sets aside AAR ruling on GST levy for System Use Gas value in re-gasification services under section 15

In Re: M/s. Shell Energy India P Ltd.,

The AAAR Gujarat set aside the AAR ruling dated 11.5.2022 regarding GST levy on System Use Gas (SUG) value in re-gasification services. The case involved ... Levy of GST - value attributable to SUG stipulated in the agreement between the applicant and customers - requirement to include in the consideration for re-gasification services determined as per section 15 of the CGST Act - System Use Gas (SUG) is a process loss or not - HELD THAT:- The wordings in section 101 of the CGST Act, 2017, reproduced supra, is almost similar to sections 35A of the Central Excise Act, 1944 and 85 (5) of the Finance Act, 1994. To substantiate the aforementioned finding, we rely on the judgement of the Hon’ble Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-I VERSUS MEDICO LABS. [2004 (9) TMI 108 - HIGH COURT OF GUJARAT AT AHMEDABAD]. This is more so because the jurisprudence developed over the years may be referred as pari materia while ascertaining the ambit and scope of the powers of the Appellate Authority for Advance Ruling. The impugned ruling dated 11.5.2022, is set aside and the matter is remanded back to the Authority for Advance Ruling (i.e. the GAAR) for a fresh decision. ISSUES PRESENTED and CONSIDEREDThe core legal issue under consideration is whether the value attributable to System Use Gas (SUG) stipulated in the agreement between the appellant and its customers is subject to the levy of GST and should be included in the consideration for regasification services as determined under section 15 of the CGST Act, 2017.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe relevant legal framework includes the provisions of the Central Goods and Services Tax Act, 2017, particularly section 15, which defines the value of taxable supply. The section outlines what constitutes consideration and includes various components like incidental expenses and amounts incurred by the recipient but paid by the supplier.Court's Interpretation and ReasoningThe Tribunal analyzed whether the SUG is merely a process loss or if it constitutes a consideration for the regasification services provided by the appellant. The GAAR originally ruled that SUG, being a cost incurred during the regasification process, should be included in the taxable value of the service. The Tribunal noted that the GAAR's decision was made without considering new data presented during the appeal.Key Evidence and FindingsThe appellant provided a table detailing the SUG loss and its components, illustrating that a significant portion of SUG is retained and subsequently sold by the appellant. This data was not available to the GAAR when making its initial ruling. The appellant argued that SUG is a process loss, an internationally recognized concept, and should not be treated as consideration for GST purposes.Application of Law to FactsThe Tribunal considered the appellant's argument that SUG is a process loss and not a consideration under section 15 of the CGST Act. The appellant emphasized that SUG is not incurred by the recipient and does not fall under incidental expenses charged to the customer. The Tribunal acknowledged the appellant's reliance on various case laws and industry practices to support their position.Treatment of Competing ArgumentsThe Tribunal noted the appellant's contention that the GAAR erred in its interpretation by not considering the nature of SUG as a process loss. The appellant argued that the GAAR's reliance on previous service tax demands was irrelevant and that SUG should not be considered a cost of the supplier under section 15(2)(b) of the CGST Act.ConclusionsThe Tribunal concluded that the GAAR's ruling was made without the benefit of the new data provided by the appellant. Therefore, in the interest of justice, the Tribunal decided to remand the matter back to the GAAR for a fresh decision, taking into consideration all aspects of the matter and providing the appellant an adequate opportunity to present their case.SIGNIFICANT HOLDINGS'The value of SUG is an indispensable part of taxable value, for Re-gasification service supply by M/s Shell and liable to GST.'The Tribunal set aside the GAAR's ruling and remanded the case for reconsideration, emphasizing the need for the GAAR to examine the new data and arguments presented by the appellant. The Tribunal also highlighted the importance of considering industry practices and the specific contractual terms in determining whether SUG constitutes consideration under the GST framework.The Tribunal's decision underscores the principle that all relevant data and arguments must be considered before reaching a conclusion on tax liability, particularly when new evidence emerges during the appellate process.