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2021 (10) TMI 367 - AAR - GSTLevy of GST - supply or not - payment of settlement fees pursuant to deed of settlement and Release signed for Timor-Leste Oil Block Production Sharing Contract - supply in GST era or not - liability of tax on whom - reverse charge mechanism - HELD THAT:- The prime reason GSPC(J) and other contractors of ANP sought Termination of the PS Contract was due to the uncertainty arising out of the arbitration proceedings initiated by the Timor-Leste Government against the Government of Australia to have Certain Maritime Agreements in Timor Sea(CMATS) Treaty declared as void ab initio and the termination of CMATS would result in automatic termination of Timor Sea Treaty governing petroleum operations in the JPDA, and in effect the PSC entered into for JPDA 06-103 - ANP initiated Arbitration at International Chamber of Commerce on 810-2018 against the respondents and vide ICC Arbitral Tribunal Order dated 16-9-2020. Further the Deed of Settlement and Release was entered between ANP and GSPC(J) [ along with other contractors] on 15-7-2020. Is the subject amount paid by M/s GSPC(J) to ANP, aCost Petroleum charge paid to ANP/ Exploration Costs paid to ANP/ Damages as a condition of Contract of PSC paid to ANP? - HELD THAT:- The subject payment to be paid by GSPC(J) to ANP is to be borne by GSPC(J) as the liability is several and each Respondent is obliged to pay only its respective proportionate share of the Settlement Sum per the ICC Order dated 16-9-20 and not jointly and severally, as submitted by the applicant - The subject payment is not for the breach of PS Contract. The PS Contract had been terminated on 157-15. The subject payment was in pursuance to the Deed of Settlement and Release, vide which there was an agreement between GSPA (J) and ANP and Release of Performance Guarantee of GSPA (J) by ANP - ANP not to pursue the Arbitration Proceedings against GSPC(J) on payment of subject payment by GSPC(J), as the subject payment, as per ICC Order 169-20 is to be paid by GSPC as the liability is several and each Respondent is obliged to pay only its respective proportionate share of the Settlement Sum. Supply taking place or not - HELD THAT:- The subject activities performed by ANP to GSPC (J) for consideration of subject payment is Supply of Service in the GST era. Is subject Supply in GST era or not? - HELD THAT:- The subject agreement and subject ICC order both are dated in the year 2020 - GST era has been ushered with effect from 1-7-2017. Thus the subject activity falls within the scope of Supply, as per Section 7 CGST Act. And that the subject Supply is within the umbrella of GST era. GST liability, whether, on ANP or GSPC(J)? - HELD THAT:- Here is the supply of service by ANP which is in non taxable territory to GSPC(J) which is in taxable territory. This is import of service by GSPC(J) and the GST liability mechanism is Reverse Charge. Time of Supply of Service - HELD THAT:- The subject payment is in nature of Cost Petroleum charges arising out of obligation of PS Contract, but is in nature of Agreement charges to be paid to ANP arising out of the Deed of Settlement and Release dated 5-8-20. The subject matter of GSPC(J), has reciprocity and supply of service from ANP to GSPC(J). We note that the subject supply of service in not envisaged or arising from the Production sharing agreement, but arising as an agreement between ANP and GSPC(J) and is dependent on the Deed of Settlement and Release and therefore, subject settlement amount is not due to a breach of contract of PSC but due to the ANP’s obligation to supply said services to GSPC(J). The subject payment is consideration as payment to ANP for the supply of service. GSPC (J) is liable to pay IGST, vide Reverse Charge Mechanism, on Import of Subject supply of Service from ANP.
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