AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 1062
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....n services for natural gas. In respect of transmission services, customers procure natural gas directly from suppliers such as ONGC, and GAIL provides pipeline infrastructure for transporting such gas to the customers' premises. 2.1. Natural gas falls within the ambit of State taxation by virtue of its inclusion in Entry 54 of List II of the Seventh Schedule to the Constitution of India. Therefore, in respect of the sale of natural gas within the State of Tamil Nadu, tax is leviable under the provisions of the Tamil Nadu Value Added Tax Act, 2006. Under the CGST Act, GAIL is liable to pay tax only on the consideration received towards transmission charges. 2.2. Since GAIL is engaged in these two distinct activities across the country, it obtained separate GST registrations for the sake of uniformity, namely: (i) for the transmission vertical; and (ii) for the trading vertical. Accordingly, in the state of Tamil Nadu, the following GSTINs were assigned to each of the said verticals. ''Transmission vertical - 33AAACG1209J1Z3 Trading vertical - 33AAACG1209J2Z2'' 2.3. In a transaction involving the sale of natural gas, the seller undertakes to....
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....e notice and the findings are also in favour of GAIL, the issuance of the show cause notice is unwarranted and without jurisdiction, the present Writ Petition is filed. The Contention of the Revenue: 3. The respondent has resisted the Writ Petition by filing a detailed counter-affidavit. It is contended therein that the GST component collected from customers has been retained by GAIL's trading vertical. The trading vertical neither availed Input Tax Credit (ITC) on the GST paid nor discharged GST on its outward supplies. On this basis, the respondent has formed a prima facie opinion that there is a violation of Section 76 of the CGST Act, which applies where a person collects an amount representing tax but fails to remit it to the Government. It is further contended that the two verticals, having separate GST registrations, are to be treated as distinct persons under the GST law. After due application of mind, when the show cause notice has been issued, and the proceedings are at a preliminary stage, the Writ Petition is not maintainable against a show cause notice, and GAIL ought to submit its reply, which would be considered in accordance with law. GAIL's Rejoinder: ....
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....Supreme Court of India in Siemens Ltd. vs. State of Maharashtra [2007 (5) S.T.R. 3 (S.C.)] to contend that where a show cause notice pre-determines the issue, a writ petition is maintainable. Reliance is also placed on the judgment of the Hon'ble Division Bench of this Court in Canon India Pvt. Ltd. vs. State of Tamil Nadu [2014 (305) E.L.T. 255 (Mad.)] for the proposition that where the revenue has taken a firm and final stand, the assessee need not be relegated to alternative remedies. Further reliance is placed on Tiruchitrambalam Projects Ltd. vs. CESTAT, Chennai [2016 (43) S.T.R. 531 (Mad.)], to contend that writ petitions are maintainable where substantial questions of law arise. 5.4. The learned counsel also relies on Union of India vs. Kothari Petrochemicals Ltd. [2019 (367) E.L.T. 530 (Mad.)], wherein a show cause notice was interfered with on the ground of lack of jurisdiction. 5.5. Reliance is further placed on the judgment of the Hon'ble Division Bench of this Court in Mahindra and Mahindra Ltd. vs. The Joint Commissioner (CT) (Appeals), Chennai [2021-VIL-154-MAD [W.A.No.493 of 2021, 18.02.2021], to contend that in exceptional circumstances, the writ juris....
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.... The Discussion & Findings: 7. At the outset, it is to be noted that on the very same set of allegations, the Gujarat Wing of the Revenue had issued identical show cause notices and, after hearing both sides, passed an order dated 30.12.2024, bearing ref: DIN-20241265TAOOOOOOF82D, taking into account that (a) it is the transmission service that is taxable under the CGST, 2017; (b) the transmission vertical had duly paid the tax at the applicable rate; and (c) the action of the trading vertical is not a collection of tax but a reimbursement of the sum paid by the transmission vertical. Accordingly, the proceedings are dropped. The exact defence of GAIL is extracted, the nature of the invoices is considered, and findings are made in para 8.9. of the said order. Relevant portions are excerpted as follows: ''8.9. I carefully examine the correspondence of the noticee, relevant in this matter, reproduced below, addressed to the Secretary, PNGRB, Government of India, along with "Annexure-A", clarifying that " GST charged by the transmission division is a cost to the trading division due to the exclusion of natural gas from the GST ambit. Accordingly, the GST cost incur....
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....owever, they were noticed to be collecting "reimbursement of GST cost on transmission charges" apart from the Basic price of gas, marketing margin, and the gas transmission tariff. It is also stated that the "reimbursement of GST cost on transmission charges" is retained by M/s. GAIL. The amount of GST paid by M/s. GAIL under its registration 33AAACG1209J1Z3 to the Government account is found to tally with the amount collected as "reimbursement of GST cost on transmission charges" from its customers under its registration 33AAACG1209J2Z2.'' 7.3. Thus, what remains is to consider the question of law pure and simple regarding the interpretation of Section 76 of the CGST Act, 2017. It is only in this context that this writ petition was entertained at the show cause notice stage in the year 2020, and the parties have completed their pleadings, and submissions have also been made on the merits. The matter has been pending for more than 5 years, and at this stage, it is not appropriate to relegate GAIL before the Assessing Authority. More importantly, to decide the issue, it is not necessary to look into any additional material from GAIL. From the contents and Annexure of the ....
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....t out the relevant facts and the basis of his decision. (9) The amount paid to the Government under sub-section (1) or sub-section (3) shall be adjusted against the tax payable, if any, by the person in relation to the supplies referred to in sub-section (1). (10) Where any surplus is left after the adjustment under subsection (9), the amount of such surplus shall either be credited to the Fund or refunded to the person who has borne the incidence of such amount. (11) The person who has borne the incidence of the amount, may apply for the refund of the same in accordance with the provisions of section 54.'' (Emphasis supplied) 7.5. The term "Person" is defined under Section 2(84) of CGST, Act, 2017 as under:- ''(84) "person" includes- (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government comp....
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....ads as follows : ''25. ..... (5) Where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons for the purposes of this Act.'' 7.9. In this case, the payment is not claimed through another distinct entity registered in another State, but rather through one in the same State. Thus, it is claimed as a payment-and-reimbursement arrangement by the same person, GAIL. It must be borne in mind that the proceedings are under Section 76 of the CGST Act, which itself starts with a non-obstante clause and purports to deal with the collection of tax and its non-remittance to the Government exchequer, and not with technical considerations of this kind. Neither a party using multiple registrations in the same State can justify non-payment of any tax collected, nor can it justify invoking Section 76 of the CGST Act, despite honest and accurate payment, merely because the establishment is a distinct person in the same State. 7.10. A careful reading of the show ca....