TaxTMI 
TaxTMI 
2021 (3) TMI 1049
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.... upon the Appellant for the period July 2014 to March 2015 and also orders for recovery of interest and payment of penalty. 2. The Appellant regasifies Liquefied Natural Gas [LNG] owned by customers in terms of Agreements which also contain a clause relating to "allowed loss and consumption" under which a certain percentage of LNG made available to the Appellant by the customers is understood to be lost/consumed in performing the regasification services. The Appellant discharged service tax liability on the amount received for regasification services, but the Revenue proposed to levy service tax on the value of such pre-fixed quantum of LNG identified towards "allowed loss and consumption" on the ground that such "free of cost" supplies ....
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....U [One million BTU's] of RLNG received by the customer at the Delivery Point during such billing period. The Appellant collected service tax on the regasification charges from the customers and discharged its service tax liability thereon under the category of "Business Auxiliary Services". Thus, except for the quantity of LNG consumed, utilized or lost during the regasification process in terms of the "allowed loss and consumption" clauses in the Agreements, the Appellant discharged service tax liability on the service charges pertaining to 99%- 99.34% of the LNG received from the customers. 5. The Department conducted an audit of the Appellant for the Financial Years 2008-2009 to 2011-12 and a Demand Cum Show Cause Notice dated 10 Dece....
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....ue, but the Appellant did not include this value and did not pay service tax resulting in short payment of service tax. xxxxxxxxx 22. The contention of the Appellant is that the concept of "allowed loss and consumption" contemplated under the Agreement cannot be considered as a non-monetary consideration for the regasification service. According to the Appellant, the "allowed loss and consumption" is effectively a remittance of the performance as agreed upon between the parties and is not in the nature of a "consideration" for the service of regasification. xxxxxxxxx 24. Explanation (a) to sub-section (4) of section 67 of the Act defines "consideration" to include any amount that is payable for the taxabl....
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....n if it is assumed that the customers provided LNG to the Appellant as "free of cost material" for the services of regasification, then too the "free of cost material‟" supply would not constitute "consideration" for the purpose of levy of service tax because the value of such LNG cannot be added to the amount charged by the Appellant for determining the taxable value of services in view of the decision of the Supreme Court in Commissioner of Service Tax vs. Bhayana Builders [2018 (10) GSTL 118 (SC)]. xxxxxxxxx 31. The aforesaid decision of the Supreme Court emphasises that service tax is payable on the gross amount charged which would be the amount billed by the service provider to the service receiver. Thus, unless....
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....s to the Appellant cannot be included in the value of taxable service. xxxxxxxxx 37. What is also important to note is that the stipulation "allowed loss and consumption" is a condition of the contract and cannot be treated as a consideration for the contract entered into between the Appellant and the customer. Such a distinction has been noticed in a Goods and Service Tax ruling rendered by the Australian Taxation Office [GSTR 2001/06] relating to non-monetary consideration. It was observed that the recipient of a supply may provide or make things available for the supplier to use in making the supply. This thing may not necessarily form "consideration" and in this context an example was cited. The relevant paragraph 90 o....
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....consideration for Eddie's supply." 38. In this view of the matter also, the "allowed loss and consumption" will not form part of the "consideration" for the purpose of levy of service tax. xxxxxxxxx 49. In this view of the matter, the Commissioner was not justified in confirming the demand of service tax on the value of pre-determined quantum of LNG identified by the parties towards "allowed loss and consumption" since such "free of cost" supplies of LNG by the customers cannot form part of the "consideration" received by the Appellant. The value of such LNG cannot, therefore, be included in the taxable value for payment of service tax. 50. Thus, for all the reasons stated above it is not possible to ....