Case Law Details
Aswathy Gas Agencies Vs Indian Oil Corporation Ltd. (Kerala High Court)
Kerala High Court held that unless and until there is any such supply of goods/services, the question of demanding GST does not arise at all. Thus, respondent Corporation would not be entitled to collect tax under the provisions of the CGST Act 2017/SGST, Act 2017 from the petitioners.
Facts- These writ petitions are filed by distributors of LPG appointed by the 1st respondent herein challenging orders imposing penalty, appellate orders, as also the Marketing Discipline Guidelines, 2018 under which the penalty is imposed. The only other subsisting challenge arising for consideration in these writ petitions is as regards the demand of GST (Goods and Services Tax) by the impugned orders.
Conclusion- There is no case for the respondent Corporation that the petitioners and the respondent Corporation have entered into such an agreement/contract for a “consideration”. Such an agreement cannot be presumed to exist between the parties also. Here, the amounts sought to be collected from the petitioners towards penalty are not towards tolerating an act/situation. Instead, the amounts sought to be recovered are for not following the terms of the agreement/MDG framed by the respondent corporation. In fact, the amounts are sought to be recovered as a deterrent against future breach of contract between the petitioners and the respondent Corporation. The amounts sought to be recovered are under no stretch of imagination being collected towards tolerating the violation of the terms of the MDG. Thus, the respondents are not entitled to collect GST from the petitioners herein.
Held that the respondent Corporation would not be entitled to collect tax under the provisions of the CGST Act 2017/SGST, Act 2017 from the petitioners herein. Subject to the afore declaration, these writ petitions would stand dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
These writ petitions are filed by distributors of LPG appointed by the 1st respondent herein challenging orders imposing penalty, appellate orders, as also the Marketing Discipline Guidelines, 2018 (hereinafter referred to as “MDG”) under which the penalty is imposed.
2. By judgment dated 12.12.2024 in W.P(C) No.9331 of 2020 and con. cases, I have repelled the challenge against the
3. The petitioners have further challenged the imposition of penalty in these cases as confirmed by the appellate In W.P(C) No.2552 of 2021, penalties were imposed by Ext.P10 order issued by the 2nd respondent with respect to a complaint raised by a consumer/customer alleging non-attendance of a leakage complaint. The petitioner has raised a contention to the effect that there was no deliberate non-attendance of the complaint as alleged, that the complaint was received at its end only on 21.8.2020 by 4:33 pm, that the complaint was attended by the mechanic through a telephone call by 5:30 pm/5:45 pm etc. However, those contentions appear to have been properly adjudicated by the original authority and the appellate authority. In a writ jurisdiction, the appreciation of evidence in that regard cannot be carried out.
4. In P(C) No.11912 of 2021, the penalty is imposed by Ext.P5 order issued by the 2nd respondent. The allegation in Ext.P5 is with reference to certain LPG connections provided by the petitioner. It appears that the explanations offered have been examined in detail by the original authority while issuing Ext.P5 order. The appellate authority, while issuing Ext.P10, has also considered each and every contention raised by the petitioner herein. The appreciation of evidence/contentions by the original/appellate authority cannot be found fault with.
5. The only other subsisting challenge arising for consideration in these writ petitions is as regards the demand of GST (Goods and Services Tax) by the impugned orders in these In W.P(C) No.2552 of 2021, while issuing Ext.P10, an amount of Rs.28242.45 has been imposed as GST and it is sought to be recovered from the petitioner. In W.P(C) No.11912 of 2021, the respondent Corporation, while issuing Ext.P5, has sought to demand Rs.22,140/- towards GST.
6. Sri. Surendran, the learned counsel for the petitioners in these writ petitions would contend that the demand of GST as above was without any justification and arbitrary. He points out that there is no “supply of service” so as to demand GST from the petitioners. The learned senior counsel, Sri. Nandakumar, on the other hand, relies on the counter affidavit filed as well as the Notification No.11/2017- CT(R) dated 28.6.2017 issued by the Ministry of Finance, Government of India, to support the demand for GST as above.
7. The goods and services tax is levied with reference to the provisions of the CGST Act, 2017/SGST Act, 2017 (for short, the ‘Act’). The preamble to the afore Act would show that the Act was introduced to make provisions for the levy and collection of tax on the “supply of goods or services or both”. Therefore, it is to be proved that there is either:
i. Supply of goods
ii. Supply of services
iii. Supply of both
to demand GST. There cannot be any dispute that there is no supply of goods involved in the case at hand. The term “services” has been defined under Section 2(102) of the Act as under:
(102) ―”services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
The provisions of Chapter III of the Act provide for levy and collection of tax. Section 7 provides the “scope of supply” as under:
“(1) For the purposes of this Act, the expression “supply” includes––
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, 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; [and]
(e) the activities specified in Schedule I, made or agreed to be made without consideration;
([1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.]”
Section 9(2) of the Act provides for the levy and collection of tax at such rates to be notified by the Government. The respondents rely on the notification issued under Section 9 as above—Notification No.11/2017-CT(R) dated 28.6.2017—to sustain the demand for GST.
8. Therefore, so as to demand GST, it is to be proved that there is “supply of goods/services” by the person collecting the tax to the person from whom the tax is sought to be recovered. In the case at hand, it is the respondent Corporation who is claiming that there is “supply” of services to the petitioners herein. However, a perusal of the documents would show that no “supply of service” is effected by the respondent Corporation to the petitioners herein while imposing penalty by the impugned orders. Unless and until there is any such supply of goods/services, the question of demanding GST does not arise at all.
9. In this connection, reference may also have to be made to the provisions of Schedule II referred to in sub-section (1A) of Section 7 of the Act. The afore schedule to the extent relevant herein reads as under:
“SCHEDULE II [See section 7]
ACTIVITIES [OR TRANSACTIONS] TO BE TREATED AS SUPPLY OF
GOODS OR SUPPLY OF SERVICES
…………..
5. Supply of services
The following shall be treated as supply of services, namely:—
…………
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and …..”
Thus, under Serial No.5 of Schedule II, certain activities are to be treated as “supply of services”, one among them being the activity referred to under Clause (e). However, the provisions of Clause (e) of serial No.5 of Schedule II would get attracted only when a person is:
i. Agreeing to the obligation to refrain from an act
ii. Agreeing to the obligation to tolerate an act or a situation
iii. Agreeing to the obligation to do an act
It is only the afore three situations that get attracted by virtue of the entries in Schedule II of the Act.
10. Here, there is no dispute that there is no such agreement between the petitioners and the respondent Corporation. There is no case for the respondent Corporation that the petitioners and the respondent Corporation have entered into such an agreement/contract for a “consideration”. Such an agreement cannot be presumed to exist between the parties also. Here, the amounts sought to be collected from the petitioners towards penalty are not towards tolerating an act/situation. Instead, the amounts sought to be recovered are for not following the terms of the agreement/MDG framed by the respondent corporation. In fact, the amounts are sought to be recovered as a deterrent against future breach of contract between the petitioners and the respondent Corporation. The amounts sought to be recovered are under no stretch of imagination being collected towards tolerating the violation of the terms of the MDG.
11. In such circumstances, I am of the opinion that the respondents are not entitled to collect GST from the petitioners herein.
In the result, while confirming the findings in the impugned orders, it is declared that the respondent Corporation would not be entitled to collect tax under the provisions of the CGST Act 2017/SGST, Act 2017 from the petitioners herein. Subject to the afore declaration, these writ petitions would stand dismissed.
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