TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 710
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.... facts or misrepresentation of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein referred to as the Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. M/s. Oil and Natural Gas Corporation Limited is engaged in the manufacture and supply of crude oil and natural gas, which are supplied through pipelines located at delivery points across India. In the State of Tamil Nadu, the Applicant is registered vide GSTIN 33AAACO1598A1ZU, through which the present Application is being filed. 2. FACTS OF THE CASE: 2.1 The Applicant is a Maharatna Public Sector Enterprise, under the administrative control of the Ministry of Petroleum and Natural Gas and is engaged in the supply of crude oil and natural gas. They have their establishments across onshore and offshore locations in India, where petro....
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....adjusted on an annual basis, based on the Adjusted Annual Contract Quantity and excess if any, shall be refunded to GAIL. (vii) The applicant further informed that the amount of Quarterly Minimum Guaranteed Off-take charges, received from GAIL by the Applicant are treated as 'deposit' in the books of the Applicant. At the end of the financial year, Annual Minimum Guaranteed Off-take charges are calculated based on the Adjusted Annual Contract Quantity. (viii) For APM and Non-APM gas supplies, the Adjusted Annual Contract Quantity shall be determined separately and in determining the Adjusted Annual Contract Quantity for any Financial Year, certain deductions are made. After making deductions, the Minimum Guaranteed Off-take charges would be 90% of the Adjusted Annual Contract Quantity for APM and Non APM Gas. (ix) The applicant states that "minimum take or pay" or "minimum guaranteed off-take charges" are a common practice in the oil & gas industry. The Applicant makes provisions for producing natural gas, from different sources, keeping in mind the quantities committed to be purchased by GAIL or any Buyer in terms of the Agreement entered. (x) H....
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....vely done for the benefit of another person for a consideration. In this regard, the applicant have referred cases relating to Australia and New Zeland, Britain and South Africa wherein in the context of GST/VAT have held that a supply occurs when there is a positive act on the part of the supplier. (f) Further, the Applicant submits that GST is a contract-based levy, since the supply emanates from a contract that is entered between the parties to the said transaction. Therefore, a contractual supply is the essence for levy of GST. Hence, the provision of a supply, has to be seen qua the contract entered between the parties. (g) In the above background, the term Supplier has been defined under Section 2(105) to mean the person supplying goods or services, whereas the term Recipient has been defined under Section 2(93) of the CGST Act, where consideration is payable, to mean the person who is liable to pay the said consideration. Hence, the term 'consideration' in relation to supply of goods/services has been defined under Section 2(31) of the CGST in an inclusive manner. As per the said definition, consideration means any payment made or to be made, whether in money or otherw....
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....ect to consideration, the same would not amount to an activity for a consideration which is an important ingredient as per the definition of supply. (I) Placing reliance on Indian Contract Act, 1872 the applicant claimed that the liquidated damages are in the nature of penalty or compensation liable to be paid by one party to the other as a result of breach of contract and not in the nature of consideration towards any supply. Consideration should flow at the desire of the promisor. If it is not at the desire of the promisor, it ceases to be a consideration. The parties entering into contract would not desire for breach of contractual obligations. Therefore, any payment made pursuant to said breach will not partake the character of consideration and the said amount will not be taxable, as consideration received towards a supply. (m) Therefore, the Applicant is of the bona fide understanding that no GST is leviable on the Minimum Guaranteed Off-take charges imposed by the Applicant on GAIL as there is no supply rendered in exchange for the Minimum Guaranteed Off-take charges and the said charges is only in the nature of compensation paid for breach of contract. (n) They hav....
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....ms of Para 5(e) to Schedule II of the CGST Act and no GST is leviable on the said amounts imposed on GAIL. 4. PERSONAL HEARING 4.1 Ms. Nimrah Ali, Advocate & Authorised Representatives (AR) of the applicant along with others as listed above, appeared for the personal hearing as scheduled. The AR reiterated the submissions made in their application for advance ruling. AR further informed that the 90% of the Adjusted Annual contract quantity is being collected as MGO from GAIL on a quarterly basis which is adjusted at the end of the financial year and excess if any shall be refunded to GAIL. AR informed that the MGO charges is treated as 'deposit' in the books of the applicant and at the end of the financial year this MGO charges imposed on GAIL, failing to fulfil the commitment, is accounted as 'Other Income' in their books of accounts. 4.2 The members requested AR to furnish proof for the accounting being done on MGO charges collected and its break-up for at least any two financial years for which the applicant has submitted the same vide email dated 01-08-2025. DISCUSSION AND FINDINGS 5.1 We have carefully considered the submissions made by the applicant in the adva....
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....arter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation.- For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] (b) import of services for a consideration whether or not in the course or furtherance of business; 2[and] (c) the activities specified in Schedule I, made or agreed to be made without a consideration; 3[ **** ] (d) [**** ]. [(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supp....
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....as "what the 'promisee' does or abstains from doing for the promises made to him". 11. Thus, the service of agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act is nothing but a contractual agreement. A contract to do something or to abstain from doing something cannot be said to have taken place unless there are two parties, one of which expressly or impliedly agrees to do or abstain from doing something and the other agrees to pay consideration to the first party for doing or abstaining from such an act. There must be a necessary and sufficient nexus between the supply (i.e. agreement to do or to abstain from doing something) and the consideration. 12 Close perusal of the entry at serial 5(e) of Schedule II would reveal that it comprises of three different sets of activities viz. (a) the obligation to refrain from an act, (b) obligation to tolerate an act or a situation and (c) obligation to do an act. 13. All the three activities must be under an "agreement" or a "contract" (whether express or implied) to fall within the ambit of the said entry. In other words, one of the parties to such agree....
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....erating the breach or non-performance of contract. They are rather payments for not tolerating the breach of contract. Imposition of MGO charges/liquidated damages stipulated in the contract is to ensure performance and to deter non-performance, unsatisfactory performance or delayed performance. Liquidated damages are a measure of loss and damage that the parties agree which would arise due to breach of contract. They do not act as a remedy for the breach of contract. Therefore, MGO charges/liquidated damages is nothing but a penalty imposed and not the desired outcome of the contract. By charging and accepting the MGO charges/liquidated damages, the applicant aggrieved by breach of contract cannot be said to have permitted or tolerated the deviation or non-fulfilment of the promise by GAIL. 19. We are of the view that the amount of MGO charges which is paid as 'liquidated damages' is an amount paid only to compensate for injury, loss or damage suffered by the applicant due to breach of contract and shall not be construed as the activity of refraining from or tolerating an act or to do anything. In this case, MGO Charges are merely a flow of money from GAIL who causes breach of ....