9911796707
TMI Blog2023 (4) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation (hereinafter referred to as applicant), registered under the AP Goods & Services Tax Act, 2017. 3. Brief facts of the case: 3.1 M/s AP Power Development Co. Ltd.,(APPDCL) is a special purpose vehicle which was originally set up to implement mega power projects In the state of Andhra Pradesh. The company shareholding consists of AP Genco with 51 percent stake and the balance 49 percent being held by the four discoms of erstwhile Andhra Pradesh (together holding 45.04 percent) and the Government of Andhra Pradesh (3.96 percent). APPDCL runs a thermal power project, Sri Damodaram Sanjeevaiah thermal power station, in krishnapatnam, Andhra Pradesh. The assesses are under state jurisdiction, registered in nellore 1 circle, nellore 1 division and having GSTIN 37AAPCA6825R1Z0. 3.2 APPDCL has entered an agreement with Chettinad logistics private limited for supply of certain services which includes liasoning with M/s. MCL, east coast railways, paradip and adani Krishnapatnam ports for coordination and supervision of coal loading, liasoning with east coast Railways for arranging rakes, transportation of raw coal, crushing of boulders to -100 mm size, storage and handling at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party shall be entitled to receive reasonable compensation not exceeding the amount so named or the penalty so stipulated. 5.3. The applicant further submits that, as per the provisions laid down under section 7 of the CGST Act, the expression "supply" includes all forms of supply of goods/services for a consideration by a person in the course and furtherance of business. 5.4. The applicant submits that, Schedule II Para 5(e) makes it amply clear that in order to invoke the above as taxable activity, there needs to be an agreement to tolerate a situation between APPDCL and CHETTINAD LOGISTICS PRIVATE LIMITED. 5.5. The applicant further submits that, these liquidated damages arise on mutual acceptance of both parties on account of an 'unintentional occurrence' which both parties actually intend to avoid. Hence liquidated damages cannot be said to be a consideration received for tolerating the breach or non performance of contract. They are rather payments for not tolerating the breach of contract. The applicant submits that, the clause of liquidated damages in the agreement between APPDCL and Chettinad logistics private limited, provided for with an intent to ensure due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions made by the applicant in their application for advance ruling. We have considered the issues involved, from which advance ruling is sought by the applicant and the relevant facts along with arguments made by the applicant and also their submissions made during the time of the personal hearing. The applicant submits that, liquidated damages will be collected when the service provider (Chettinad Logistics Private ltd) fails to perform the job assigned by the service receiver (APPDCL) as per the terms and conditions stipulated in the contract. Service Provider will collect liquidated damages for increase in moisture of raw coal over the loading end, for increase in ash percentage, penalties for late transportation of coal and also penalty for short supply of coal. The at hand is to determine whether liquidated damages collected by APPDCL from CHETTINAD LOGISTICS PRIVATE LIMITED for non-performing of an act constitute as supply or not. At this juncture I invite attention to the provisions of Indian Contract Act, 1872 which is applicable to the above scenario. A combine reading of the Provisions (1) & (2) of Section 55 of the Indian contract Act, 1872 reveals that a failure to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny service provider nor the appellant. There is a clear mathematical formula as to calculation of such amount and the conditions/scenarios contingent upon which the amounts are payable are clearly narrated in the agreement itself. It is simply inconceivable that any prudent business person will pay amounts for no merit and benefit. It is certain that the service provider is paying the said amounts only for certain advantage derived or to ward-off any disadvantage incurred. Hence it is only in response to something done by the appellant. It is inconsequential whether the payment is for tolerating the mistake or not-tolerating. The circular relied upon by the appellant one is not universal and absolute. The circular is only meant to clarify the position of law and shall be applied reasonably having regard to the facts of the case. The circular had clearly mentioned, inter alia, vide para 7.1.6 that "Therefore, such payments, even though they may be referred to as fine or penalty, are actually payments that amount to consideration for supply, and are subject to GST, in cases where such supply is taxable. Since these supplies are ancillary to the principal supply for which the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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