TaxTMI 
TaxTMI 
2025 (3) TMI 361
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.... referred to as 'appellant') against the Advance Ruling No. GUJ/GAAR/R/2022/26 dated 11.5.2022. 3. Briefly, the facts are enumerated below for ease of reference: • The appellant, is a wholly owned subsidiary of M/s. Shell Gas B V Netherlands; that it owns & operates an LNG [Liquefied Natural Gas] regasification terminal at Hazira, Surat and is registered with the Department; • that in addition to the services of regasification of LNG, they also provide certain incidental & ancillary services related to [i] unloading of LNG; [ii] storage of LNG in cryogenic tank; [iii] delivery of RLNG [Re-gasified LNG]; • that NG [Natural Gas], a highly flammable gas is condensed into liquid state at close to atmospheric pressure by cooling down the gas to very low temperature (-160°c) for transportation; that upon receipt of LNG at the destination port it is again converted into gaseous state; • the vaporization is achieved either through ORV [Open Rack Vaporizer] method or through SCV [Submerged Combustion Vaporizer] method; that SCV is only a standby; that at all times, ORV is the primary and preferred mechanis....
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....gasification process; that during shutdown/breakdown/ power failure RLNG is lost; that during unloading gas is used; that gas is also used during planned maintenance of the system; • that had the appellant purchased gas for these procedures, it would have added to the cost of purchase towards provision of service; • that further the uncertainty in gas measurement loss can be both negative as well as positive; that negative loss means there is gain in stock of gas for the appellant; • that gas charge is a cost on re-gasification services; that it is an expenses incurred by the appellant; • that consideration includes any payment in money or otherwise; • that the case law cited are different in facts. 6. The GAAR, vide the impugned ruling dated 11.5.2022, held as follows: 1. The scope of Re-gasification Services covers not only the services related to regasification of LNG into RLNG on behalf of M/s Shells customers but includes allied, incidental and ancillary services such as receipt of LNG Carriers at the Port, unloading of LNG from LNG carriers and its receipt at Terminal receipt point, temporary storage....
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....ax is irrelevant and unwarranted; • that in the legacy regime process loss was not subject to tax; • that SUG is nothing but LNG & is therefore outside the purview of GST; • that GAAR failed to appreciate the two judgements in the case of Petronet LNG Ltd 2019-VIL-659-CESTAT Del-ST & 2021-VIL-118-CESTAT-ST; • SUG does not qualify as consideration under GST; that in order to qualify as consideration it should be [i] monetary or non-monetary [ii] received in respect or inducement of supply; [iii] made by the recipient or by any other person; that there is no non-monetary consideration involved; • that there is no nexus between the SUG and the service provided by the appellant; • that SUG does not fall within the ambit of either section 15 (2) (b) or (c), ibid; that it does not fall within 15 (2) (b) since it is not an amount incurred by the recipient & is a process loss; that it is not covered under 15(2)(c) because it is not an incidental expense charged by the appellant to the customer but a process loss; • that the GAAR has failed to appreciate that in the eventual....
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....a water as heating medium; that the primary source of power to run the GTG is the electricity supplied by the State Electricity Grid; • that loss of gas during various stages of the regasification process is owing to the following reasons: • inherent losses on account of the nature of LNG and RLNG; • losses in the system during the process of unloading, storage and regasification of natural gas; • inaccuracies or uncertainties in the measurement of losses as well as natural gas in the system while undertaking the above processes; • use of the gas during certain exigencies and as an exception in running equipment such as Gas Turbine Generator (GTG) and Submerged Combustion Vaporizer (SCV). • that the contract is to provide LTCOR^1 services; • that the purpose of SUG is in the nature of remission to avoid situations triggering imposition of penal consequences i.e. liquidated damages/termination; the concept of remission is well known under the Section 63 of the Indian Contract Act, 1872; • The below mentioned perversities and infirmities in the impugned ruling makes it ex facie bad....
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....e decision mentioned in the OIO No. 14/Refund/MC/Div-CP/221-22 dated 25.01.2022 in the case of M/s Petronet LNG Ltd.; • that the concept of SUG is the same under the regime of service tax and GST, is same; • that unless the contract states that the SUG made available to the Appellant is intended by the Parties for the inducement of regasification services, it cannot qualify as a Consideration. • that not a single clause exists which indicates that it was the intention of the parties; • that the concept of SUG is nothing but a remission, which is not the same as a consideration; • an amount equivalent to 0.66% has been carved out as a remission and accordingly, it is not required to be redelivered by the Appellant; that in substance SUG is nothing but a remission of an obligation under the Contract expressly agreed to between the parties as per principles set out under Section 63 of the Indian Contract Act, 1872; • that once SUG does not qualify as a consideration, it cannot form part of the value on which GST can be charged; • The Ld. Authority has failed to understand the concept of 'process....
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.... price is the sole consideration for the supply. (2) The value of supply shall include- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation.....
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....ator set is provided with an independent acoustic enclosure and a CO2 firefighting system. 6. SCV: The terminal has one Submerged Combustion Vaporizer (SCV) of rated capacity 138 tph, which uses fuel gas as the source of heat for conversion of LNG to Natural Gas. In the Submerged Combustion Vaporizer, a stainless-steel tube bundle is submerged in a bath of warm water. In this vaporizer, heat generated by burning fuel gas is used to warm the water which in turn vaporizes LNG. Bath water is heated by the use of flue gases created from the combustion of Low Pressure Fuel Gas in a Combustion Chamber. SCV operation is intermittent and used on need basis. Under normal operation it is in standby, because primary equipment as vaporizer is Open Rack Vaporizer (ORV) which uses sea water as heating medium. 14. The table supra, depicts the following viz [i] the actual process loss [column no. 6] as a component out of the SUG, is very meagre/insignificant; [ii] the data depicted in column 5 reveals the quantum utilized by the appellant towards re-gasification; [iii] the data depicted in column 7 reveals that a considerable portion of the SUG was retained b....