Allowed

GUJ/GAAAR/APPEAL/2025/02dt. 22.01.2025 of M/s. Gspc (Jpda) Ltd.

GST AAAR22 Jan 2025GUJ/GAAAR/APPEAL/2025/02dt. 22.01.2025

Case brief

AI extract

What is this about?

The Gujarat Authority for Advance Ruling, on appeal, held that liquidated damages paid for breach of contract conditions do not constitute consideration for a supply and are non-taxable under GST, overturning a previous ruling that imposed tax liability.

What did the court decide?

The appellant is not liable to pay GST on settlement fees consisting of liquidated damages for breach of the Production Sharing Contract.

GUJ/GAAAR/APPEAL/2025/02dt. 22.01.2025 of M/s. Gspc… — GST and Indirect Tax | GST AAAR (2025)

¶1

¶2

(; t-l,lAItA'I' AI' l'} ll L LA'I'E A Ul'I I ORI'I'Y F'OI{ AI)VANCI'I^{lt tIL I N (l} (;OODS ANI) SE,RVICE,S'I'AX .fffl'o* I)/5, ITA.IYA KAR I}IIAVAN,^{ASIIIIAM ITOAI),} "PMuaRxrt AIIMI,II)AIIAI) - 3tt0^009.

¶3

nt)vnNCL RULING(nI',PIiAL)^{NO. GLl.l/GAAnIVAI>Plt.Ll,l2o25I02} (l N AI, l,l . l^(lA' l'lON NO. Acivar-rcc I{u^{l i} ng/S(is'l'&C(l^{S I' 2021/A I{/2 5}

¶4

I)atc . 77-01 .2025

¶5

Narnc ancl addrcss o[ thc appcllant GS'l'l N ol' tl-rc appcllant Aclvancc l{uling No. ar-rd I)atc I)atc o l' appcal t)atc o1' l)crsonal I lcaring I)r'cscnt lilr thc' appcllant

¶6

M/s.^(iSI'}C (Jl)l)n) [.tcl., GSPC Ilhavan ,I)lh^I Jdyog^IJhavan, Scctor- I l, Gandllinagar'. 24LACCG8398Q r7,Q GIiJ/GAAIVI{ / 5012021^{ciarcci 6.9 .2021} | 4.10 .2021 8.1 1 .2024 Shri Anil^(lhiuhan

¶7

At thc outsct wc wcluld likc to rnakc it clcar^{that thc provisionso[ thc} L'cntral^(ioods and Scrviccs'l'ax Act,2017^{and Gujarat (ioocls ancl Sct'r,ic:cs'l'ax} Act,2017 (hcrcinalicr rclbrrcd to as thc'C(iS'l'Act,2Ol7'ancl^{thc'(i(ls'l'Act,} 2()17') arc pari materia and havc thc samc^{provisions in lilcc mattcr and clil'lbr fionr} cach othcr only on a lcw spccific provisions.^{'lhcrclorc,tttllcss a mcntion is} grarticr-rl arly rnadc to sr-rc'h dissirnilar provisions, a rclcrcncc^to thc C(lS'l'^Act,20l7 rvould erlso mcan rclcrcncc to thc corrcsponding sirnilar provisions in^{thc GGS'I'} Act, 2017 .

¶8

'l'hc prcscnt appcal is lllcd undcr Scction 100 of'thc CGS1' Act, 201 7 an<J tlrc^{(lGS'l'Act,2017} by M/s. GSI)C (JI'}DA) Ltd., (lbr short -^{'Appcllarrt')agetinst} tlrc Adverncc Ituling No. GIIJ/GAAI{/R/S012021 datcd 6.9.2021^.

¶9

a _) llricfly, tl-rc lacts arc cnumcratcd bclow Ior casc ol'rcl-crcncc:

¶10

i.l. M/s.^(iSI'}C' JJPI)Al, holding 20% participating intcrcst lPf l, along with 5 othcr conccssionarics, cntcrcd into a Joir-rt Opcrating Agrccmcnt [.lOAl.^'l'lrc appcllant along with thc conccssionarics also cntcrcd into a Production Sharing (lontract ll'}SCl *ith^'l'imor Sca [)csignatccl Authority fbr urnclcrtal<ing cxploration aci-ivitics in Illocl< JI'}l)A 06- i03 ir-r thc .loint l)ctrr>lcr-rnr [)cvclt>pnrcnt Arca l.II'DAl.^{Onc amongst thc conccssionarics, M/s. Oilcx Ltd, ^/as appoirrtcd as thc} opr'[Algr ttndcr thc JOn. .,,:,::r,il ._

.,,:,::r,il ._ ,,;

'!a:l .r

I)a .,:"..

3.2. JI,I)A is an arca of^{'l'imor'-[.cstc} &. r\ristralia &^{thc pctrolcutn cxisting} .rvithir-r .ll)l)n is a rcsourcc cxploitccl jointly by^{(lovcrntncnts} o1"l'imor-l.cstc ancl Australia.

¶16

3 .3. 'l'imor-l.cstc (iovcrnmcnt, initiatcd arbitration procccdings againsl (iovcrnmcnt ol'Aurstralia to havc ccrlain Maritirnc Agrccmcnts in'l'imor Sca'l'rcal.v to bc clcclarcd as voicl-als-inilio I'[iis tcrtnirtalion^{would rcsult in autometLic} tcrlnination of^'l'imor Sca^'l'rcat)r !r()vcrning^{pctt'olr:ulttopcrations in JPDn & thc} produrction sl-raring contrar:t cntcl'cd il'rto for JPlll\ 0(t-^I 03.

¶17

3.ti. 't'hc six coltccssionaric:; in vicrv ol' thc albrcmcntionccl ariritt'atiotr procccdings, rcqurcstccl ,\NI)' k,r. tcrtnination ol'thc^I'}SCI by^{nrtttual agrccmcrlL.} ,/\N[), issucd a noticc ol'intcntion to tr:rrninaLc^{I)SC to t.hc opcrator.nNP tlrcr'calicrr'} tcmrinatcd thc I,SCI with a dcmancl ol'paymcnt^{ol'cstimatccl cost o1'cxplorationnot} carricd out & damagcs lor breach ol'its local^{contorlt obligations in tcrms of articlc} a s@)(iii) of PSC.

¶18

3.5. ANP lurthcr Illcd a rcciucst lbr arbitration;^{scttlcrncntwas rcachcd by thc} partics rcgarcling thc amount^1.o bc irayablc^{[r)' ti"tc coltcc'ssionarics to ANI'}; thc} ,Arbitral^'l'r'iburnal vvas thcrcaficr notillcd^{o1' thc scttlclncnL so arrivcd; thc Arbitrai} 'l'ribunal, ir-r vicr,r,ol'thc scttlcmr.:nt agrccmcnl bctwccn thc partics, dcclarccl thc: procccclings clclscd in ac,cttrdancc^{rvitll thc rulcs.}

¶19

3.6. 'l'hc Arbitral 'l'ribunal, clircctccl pa1'nrcnt o[' an atrrount ol- t.]SI) 80,00,000/- of which thc GSPC^(JPDn )'s^{sharc was '20%.}

¶20

,,-.\

¶21

In vicw 9l'thc lbrcgoing tact"s, thc^{appcllant had sourght AdvanccltLrling} on thc lof lowing qucsLions, viz:

¶22

"l,l/hather pqttntent of'.settlemerr/ .fi:cs' ugain,sl rle:nranc{ mucle by, 7l/1lP vi6ls leller tlult:d t 5.^-. 2 0 t 5 u I I rr tc t I ct'.t,^tt l'^{(iS'l'u ndr:} r^{( ).'l' re gt tl u I i t)1?'""}

¶23

Conscclucnt to hcaring^{tl'rc applicanl, thc: Guj arai Authority fbr Aclvancc} I{ulirrg lGAAItl, rccordcd^{thc lbllorving findings viz}

¶24

a that thc rcason^{(lSIrC zrlong u,ith tlthcrc()nccssionarics sought tcrtnination\'ils} cluc tg unccrtaint,v arising^{out ol'art'ritration initiatcdby 'l'irntlrc-l.cstc (iovcrnt-ncnt}

¶25

'nNI, l,,ltrtgr.idurle^{lYerciopctltfut l'atroleoli t,[inaruislis'l'irnor-l,cstc'srcqrtlatory arrthoritylilr oil.} rclatccl activitics; that this institution^{is vcstccl r,vith adrtrinistrativcand llnitncial autr:nomy.}

¶26

i | :.!. I)agc 2 tll- l() I il i-i.L: -: :, ^::'.,. I ",t^{;/ !,:} -t⁾ .-f'/'

¶27

i

¶28

¶29

against^{(iovcrnrncntolAustraliato havc ocrtain maritirno agrccmcnts in '['irnor Sca} dcolarcd as^{voicl ab inititl;}

¶30

. that in this casc.^{(]SI,C is paying thc amount to ANI'}& not tho tlthcr way rrlund;} . that thc arn.unt paid is^{nclt an cxplrlration cost/rcirtrbursctlcntas contcr-rclcdby thc} appcllant;

¶31

. thc appcllapt is^{gbligccl topay onlv itspropclrtitltratcsharc ancl trclt} .itlintly/sq'crall)/'^{as is lrcing ctlntcndcd:}

¶32

. that in pursuancc cll'thc^{clcccl o[-scttlcrncnt&" rclcasc. thcrc \vas an agrcctlrcnt} bctwccn thc appcllant^{ancl ANt'}; that it was rolatcclto ANI) agrcoingto dtl an ilct'} tolcratc thc situation^{zrncl roliaining liorn pursuing thc arbitration prooccdings;}

¶33

. that thc paylxcnt ol'USI) 80,00,000/-^{is not arising as a conclititlnto thc I'SC but is} rnacrc on aocounl^{of scrviccs providcd by nNP to (iSP(l(.rPI)A);}

¶34

that ANp has supplicd thc^{scrviocliorn non taxablc tcrritory to a taxablctcrrittlry:}

¶35

. that tho subjcct scttlcmcnt amount^{is not cluc to brcacho1't'SCbut duc ttl ANI)'s} obligation to supply^{said scn'iccsto GSI'C'}

¶36

6 'l'hc GAAI1, thcrcalicr, viclc thc irnpugnccl ruling clatcd ltl.l 0.2021 ,^hcld

¶37

as lilllows:

¶38

,,GS7C (.1) is licrhle to 7to1t IGST, vicle lleverse Chcrrge Mec:hanisnt on inttrtttt"l o.f

¶39

sttbject supply^r1f'service [i'ottt^ll{P."

¶40

AggricvccJ by thc^{aforcsaicl advanccruling, thc appcllantis bclorcuS,} raising thc fbllorving^{contcntions, viz}

¶41

a thc paymcnt to ANI, is on account^{olbrcach o1'conditi<lno['productionsharirlg} contretot;

¶42

. l.hat thc producti<ln sharing contract^{is ftrr a block in.ll'l)Awhichis in non taxablc} tcrritory;

¶43

. that thc arnount payablc by thc appcllant^{to ANI'is for a pcriod priorto (iS'l'} rcgirnc:

¶44

. that thc prulduction sharing contract^{is nclt akin trl a scn'icccrlntract.}

¶45

g. l)crsonal hcaring in^{thc mattcr was hclcl on8 .l 1.2024rvhcrcin Shri Anil} C.hauhan, appcarcd^{ancl rcitcratccl thc submissionsmaclc in thc appcal. I Ic} sr-rbr"nittcrd additional^{suburission during thc coursc ol' pcrsonal hcaring, rcitcrating} thc submissions alrcacly^{rnadc.In thc acklitional subrnission, thc appcllant has} cnclosccl thc copics ot'thc^{lbllowingcircular, judgcmcnts and advanccruling,vtT,}

¶46

(lircular No. 1 I8 1012022-(is'l' clatcd^3.8.22

¶47

. Northcrn Coaltlclds2

¶48

Krishnapatnam })orl. Corlrpany l,td'

¶49

. I( N litlod Industrics [) Ltd'l

¶50

. Nr:1'vcli Liglritc C'orptlrittioti Ltcl5

¶51

. Stccl AtrLirtlritv ttl'Inrlia Ltcl('

¶52

. Arnit Mctalil<s l.tcl '

¶53

'^{2o2t(7 I} )^{(-;s't't. 63 'l'ri l)cl}

¶54

t tt)2; (72) (is I t. 259 'l'ri I Iycl

¶55

*2020 (.lli) (;s tl.6o'l'ri All

¶56

' 102 i (5.1)(lS'l'1,401^{'l'ri-(lhcnnai}

¶57

' ):t)?.1^{(-'i5) (jS l'1. 34 'lri-Chcrrnai}

¶58

: :rit r ii i) (iS l'1. 32,s 'l'ri Itolkata

¶59

/.' ..:

¶60

t,.r
l ri-,':i ; i...
i1' I
t,l
\r: ''i1
''.1.. 'r;.- .'l 't. tr.
r. .. '-:r
I)agc 3 of [0

¶61

¶62

a Acharnpct Solar I' Ltcls

¶63

Sr.	l)a tc	l)articulirrs
No.
I	r5.ll.2006	I)rocluctiun Sharing OorttractIl'SCI
2	L).1.2007	.lointOpcratir-rgAgrccnrcn!l.lOAI
3	12.7.20t3	OpcralorOilcxrcclr-rcslcdlbrtcruriuationol-l'}SC
4	r3.5.20I5	ANl'}issuccl anoliccol'tcrminalion
5		5.7.2015
6	8.r0.2018	ANPlhlcclarcqlrcstlbrarbitrationwiththcSccrctariatof Inlcrnational CourloIArbitrationof'thcInlcrnalionalchambcrol' CommcrccIICCI _
7	15.7.2020	Scttlcmcntamor-rntagrccdbctwccn particsviclcclccdol-scttlcmcnt& rclcasc ^''
8	2r .u.2020	I)artics toarbitrationnol.ilrcd thcArbitral^Iribunalthatsctllcmcnt haclbccnrcachccl&r'cc1r:cstcdthat a l'inal conscntawarclbcissr-rcclby thcArbitral'l'ribunal
9	24.,.2020	Ar'[ritralIribunalclccIurcclthc proct:cdiugscIoscrl. ^''
l0		6.9.2020

¶64

I..INDINGS

¶65

L) . Wc havc carc{ully gonc through ancl considcrcd thc appcal papcrs, writtcn submissions lllcd by thc appcllant, submissions madc aL thc timc o[' pcrsonal hcaring, thc Advance Ituling and othcr matcrials availablc on rccord.

¶66

'l'hc list o['irlportant datcs, c]t,ta this contract is rncntioncd bclow [br casc o l' r'c l'crq-r cc:

¶67

I 1. 'l'hc appcllant's prirnary corltcntion is that ANI'} viclc its noticc clatccl 15.7.2015, tcnninatcd thc I'}SC with a dcmand o{-paymcnt o1'pcnalty on^account of brcach cxploration not carried out and damagcs for brcach of its^{local contcnt} obligations. On thc othcr hand, GAAI{ vidc its^{irnpugncdrulinghas hcld that thc} scttlcmcnt amount payablc to ANP is not^{duc to brcach of PSC but duc to ANP's} obligation to supply scrviccs to appcllant.

¶68

iI2. Wc wor-rlcl likc to rcproclucc sorrrc rclcvant^{cxtractsof thc Production} Sharing Contract [)SC I lbr thc Joint I)cvclopmcnt^{Arca JPDA 06- I 03}

¶69

r 2023 (4) CllN'l'nX I 72 -A1'tp.nn R (iS'l' 'l'clangana

l']agc J ol' l0

,t"

3.4'^{Grortntls lbr"Tcrrnil!*tion}

¶74

(a) Where^{a Cor:tt.actt>r:} corrdition^{ortermtc rvlrrc!:tirr} /;\ ''' ltas ttol^{cornplied'i*'ilh attl'plar:'apliloval'} ,ig"tu't"t^{is sublect:}

¶75

D:sisnarcd^{Autrroritv ir}

¶76

'lc^'lrrc

¶77

:l'], |ffiffi'ilfi;''."r:ra'[ior iil::"'H './ (ivy has n^{glcctncnt wlthtonot p,id,.i:"j} #',lii :Tfll:,:l ^X#11":l:';"1:'':" t'i"t"t^{u"**ePa1'able;or}

¶78

(v) is subject^{toor corntnils an lrrsoh'erlcyIlvent'} H,ffi^{'3ii[,1, #*:';'x;il::l] J::fl r:%:,,;li[:i#]' :'?xiilliiii;'"'ll"li'i'} il)i:;^{r:.:ili;''rli;""ii}

¶79

(b) Il:.,^{:r: :',fl'l::iiiill*iii:ffi ;i!ili]ili"ri} (c) -il,*niltr}ffi;^{i,.l.l'i'iljjij;lxj,l; i l],.i,J, ilx.li,J:il,:1,1.,,;}

¶80

4.i Cott.seqttcttccs ol'Non'l'crfirrlnallce
tr) ll.. iir ,r cr,rntract Yerrr. tl.re contraclor car:ics orrt lc;s Exllloraticl litlrrt is |c11rr:lcd ri'
iturri'lc:tlrei:xplrraiiorl\/ot'kl'rog'a'.tt'''''can<.lBi:ClctrhcDcs:tlr:ilc'dr\u:horit;'
tt, ;'equire !!rat thc sholtl'all be added tc the Explcration tc be carricd oul in lhc
nsxt Corttl'act Year;
lt:l reqtritc paynlcnt of Ihc cstitrrated cost of tlre lixplcrratie)11 rlol ual'liell oll" ir:
',irat Colltra;: 'ear; or
\\(!tlllelilllllat:ltrtsr\glcctrtctttanCrequil'cpal':ilelllol'lltccrti::rrttr:i!llrsili(l:c
\ [.xploratiorr rror catried out in that Ccntlact Ycar'
( tr) ll, in a Contlacl Ycar, lhc Contractor carr:es r:ut rrtot'c Ex;rlorat!orl than is rCquiled oi
it. t5c cxccss sirall le credited against Exploration to be carried oitt irt tl'ic lollorvirlg
Conttrct ycrr.ancl. to tlte extenl in ."...ss ol'that lixplo:'31i1r11, shall ltr' htrtltct'i:atri3d
lb rrva;'ri.

¶81

ti) [:.1 thc^prp.pgscs t.;l thc lbrcgoing pr.oviSions^{Oi tlrisr\riir:lc ,1. ,tniii>l ,\riiclu/r anii} Arrnrx C:rncl exccpt^r,.,ith thc corlscnl ol'thc^{Designaied,\ttthlrrrtr'.tlt: *r::liinir} Dcvclu'lu:rcut .rrrca rviJlbe regardcd^as lixploratiott^Jxccpt to^t1:c cricnt^{il) r'i.::;;)(clr)i} a lolrnatior shrrllorvcr ol Cecper than the l"ieli concer':r.:d a:rd in rlhir;ii :ro Discovcrl, lras bccrt nrutlc.

¶82

On going through^{thc noticc o(- intcntion to tcrminatc datcd 13.5.20i5,}

¶83

issr-rcd by ANI) to thc conccssionaircs,^{WC obscrvc thc following vir.I rclcvant}

¶84

cxtracts I

¶85

t. IVOTIC-E OI;^{ItYTEI\r'lOtV TO TITRMIIVATLI}

¶86

1.2^'lhe AlVIys t"ighl^{to lerminolethe I'SC arisesin ac:cor"clrtncewith artic:les2.4 &} a 5 b)(iii) ctf the^{PSC o/'the contrctclor's n'tolerial breachqf'the lerntso['the/'S'(],} in ptarLicLtlar, tlte conlraclor's /ailtu'e^{to meellhe lixplrtralionWork I'rogront b|} t 5.1.2014 & deliver^{lhe thirc{ well.}

¶87

I]AS'1.!' FO R ISS^LI A^{AIC E}

¶88

¶89

,4^{(_'onlrac,/ors} brertch^{o,f il.\ lixp\orutionw0rl(I)rogr^r.rtrt}

¶90

2.3 As the matter currenlly^slctnds:

¶91

2.3.,t in such cit"cuntstances,^{y'rticle 4 5(a)(iii)provic{es the tll"lP\1)itl't tlte express} righl lo lerntinqle the^{PSC & require/iont lhe Conlraclor} Poyryu,',t^{of'lheeslitttctlec{} c,osl o['lhe lixplorctliou^{nol cut"t"iecl oul in that Cttnlrcrcly'ecrr.}

¶92

2.4 lior corlpleteness, /he^{relevant lerms r{'Arlicle4.5(a)(iii)prrtvicle:} " (o)

¶93

(iii) terminate this Agreentent antl require^{puvnlent of the estimatedcost o.f'the} Iixploration not corried^{octt itl tltut Contrucl yeilr."}

¶94

| 4 . A conj oint rcading^o [' thc^{cxtracts rcprodLlccdabovc,} lcads Lls tct, a to rr\NP, is il colrclr-rsion. that thc^{pavnrcnt by lhc appcllant ol't-lSI)80,00,0001-} l)itg.c 5 tli'l'll

¶95

¶96

¶97

oonscqucncc ol'brcach o1'I'}SC and not in purrsuancc ol'thc dccd o['scttlcnrcnt & rclcasc agrccrncnt bctwccn thc appcllant and ANP and ccrtainly not rclatcd to ANP's obligation to supply scrviccs to GSPC viz ANP pcrforming ccrtain obligations towards GSPC such as rclcasc of its pcrformancc guarantcc.

¶98

Wc would ncxt cxarninc thc taxability of thc amount so paid by thc appcllant to ANP lor brcach ol'I'SC.^'l'hc appcllant aftu'rclying on thc circular' clatcc'l 3 . E. 2022 ancl n Luncl'ous catic laws, ctc has avcrrcd that scttlcrncnt amount payablc by thc appcllant is not taxablc unclcr GS'l'sincc thc paymcnt is towat'cl:; brcach of'condition ol'contract & thc Iiability ariscs out clf thc tcrms and conditions stipulatcd in thc PSC.

¶99

'l'hc circular datcd 3.8.2022, rclicd upon by thc appcllant, clarilics liquidatcd darnagcs as unclcr:

¶100

7.1.1 It is contnton /br tlte pctr"lies enlering into a conlracl, lo specdy in the c'onlrac:t itself,' tlte contpen,scr/ion lltat woulc{ he payable in the evenl dthe brecrc:lt r{'the contracl. Sttch con'tpen.sotion specdiecl in a written conlrcrcl /itr breoch qf' non-petfbrntctnce r{' the c'onlroc:l or parties o/' the contract is re.ferrecl lo cts liclrtida/ecl rlumages. lJlacli'.s l.tnt, Dictionort, cle.fines^{'l.icluiclcrled} Dctmages' os c'ash con'tpensolion crgreecl tr.t b.,t,cr signecl, wrilten conlrctct ./br brecrch o.f'conlrcrc'1, pcrvcthle to lhe ctggrievecl pcrrl.tt.

¶101

On thc clucstion of taxability ol'lic1r-ridatcd darnagcs, thc circular furthcr^clarificsas unclcr

¶102

7.1.1 In lhis background a reusonable vie'vv thal cot't be taken vtith^regarcl to taxabilily c{'liquidatecl. cluntoges is that vvhere lhe arnounl^{paidcrs 'licluic{cttec.l} clantoges' ls an an,tounl puic{ only, lo cotnpensale /b, injury, loss or^clctmuge st{/brerl by the ctggr"ieved purtlt clue to brectch c{' the conlract ancl there^i.t- t10^(.1 reemenl ex /"c.tj' 0t' Int lie b lhe ct ievecl rl rece ivin the J' lo re rct ili {t rt n't or iolerule crn crcl or lo clo^qllylh4a.g loI-ll1g ttatlypallUgll-1efutrydgl7d-clcr41qge,--!rt,;L!9-11*aWe-;JUUplalgd-dAlfla-qeryIre^n't1[s-(J owo tl'lone ont lhe r v,ho causes brectch o the conlrctcl lo the r'l l,Vlut SLI ers I e lo sarch brectc:h. Sttch^pctv ntenls drs not^constitute c'ons iclerctlictrt ot'0 s I uncl are nol tctxcrble

¶103

715 T'he kev in such cases is lo consider whether^lhe impttgn'ed rtavmenls conslilttle^c: onsideralion {br^{anolher independenlcolltraq} envisagin lolerctting an acl or siluali'ot"t or re[i'ainins {rom cloins an v ctcl 0r sitaLctlictn or sint I cloin an acl lhe answer is s llten it conslilules ct .t wilhin the ntecrnin s of'the llct^{ollrcrwiseit is not a "supplv"}

¶104

7.1.6 I/'ct payn,tenl conslilr.tles a^{consideralion} /br^{a supply, lhen ilis laxable} irre.spective r{ bt,^yvhal nonle il is^{callecl; itrttr,tsl be rententherecllhcr/cl} "copsic{eration" c'onnol be c'ottsiclered cle hctrs on agreentenl/conlracl belween lwct l)ersons^{yvherein, one person cloe,s something/or anolher ctncllhctt other pct.)ts the} ,/ir"st^{in retru-n.. I/'the povn,tent is rnerely urr evenl in the courseo.f the perfbrnt(tnce}

¶105

[)agc 6 of l{)

¶106

¶107

o/'the agt,eement^{and it cloes not represenrthe 'obiect', as such, o/'the conlracl} lhen il cannot^{be consiciererl'cctnsirJeralion'.Iior exctntple,a conlracl n'tayprovic{e} rhat payntent^{by lhe recipiento/'goocJsor services shall be mode befbrea cerlcrin} date and /itilure^{t6 make pol,nrlii by the due clate shall altrctct lale /be or penaltlt'} A conlracr /br^{rran,sprtrt,/'passengersmay stipulaterhar the tickel antounlshctll} be partly or^whrti1, t'd /biied^{i/ the passenger cloes not show up. A conlrcrc'|} /b,^{p,clrctgetour n.tc6) slipttlctr"e fit(bilure itf secttrilt, cleposil in lhe evenl ql} cancellalion ,.f'tour^{hy llte c:uslctnter. Sintilarly, a conlrcrct .fbr lecrser\f'ntovobleor'} intnt,vctble^{proper.tyt1,t(tr) stipuLate thal lhe lesseeshall nrtl lerntinctle /he leuse} be/bre a certain^{pirioct ancl} lf^{hu cloes so he will have lo pct,v cerlain crmoaml(ts} early rerntinafir)n /be^{or penalty. sorue banks similarlychcrrge pre-payntenl} penarty i/'the brtrrower^{wishesro repay the loanbe.fbre the maturil,v- ct/ the} 'loan puiiort. snch antounrs paict /br acceprance r{'lare peyment, earllt lerminalion ,[' leose or /itr^{pre-paynten^tof' loan rtr lhe amounls fb(bilec{on canccllal bn Q/} service by the^{cuslomer as citntentplalerJby lhe conlracl as parl o.f'contnterciaL} terrts agreecl^{16 by the parties,constituteconsicleralion.fbr the supplyt{'u /hcilittt'} nantely, r{ accepra,ce^{,/lare pavrnenr,early rerminario,ct/ oleose} ctgreemenl, rt/'^{pre-payntenl o/lrtan antJ} 'n^{ntukingarrongentenlsfb'lhe} inlenclecl supp't)) 'by- lhe lour operalrtr respec'livelv'. 'l.here.fbre, such pctl,ntenls' even lhough^{tiril,nrr.)r,bt: re.[erruriio as} /ine^{or pert(tlll',crre oc:lttall.t'- pct.vmenls lhut} unt,unl lrt consic{eralion.fi,r^{suppllt, crnc{are subfec'/ to GST-,in c:aseswltere5vClt} supplv is /crxcrble.^{Sinr:e tlte.se^ iupplies are ctn,c:illuUto lhe pt'irtcipctl srtTtpl.v' .for} ,,hich the contrut':t^{is signecl,thelt shall be eligihle trt bc rrsse.ssecl os the principctl} strpplt;, cts^{clisc:rrssecl in clelnil in the later por{tgr(rph.s.l,lnttrrull.y,,suchpcrttntenl:;} will nol be taxoble^{il'lhe principal supplyis exertqtl.}

¶108

I^{cmpl"rasis suPPlicclI}

¶109

17 . What thc circular^{contcmplatcsis that licluiclertcddamagcspaicl trr} compensatc for^{loss or clamagc cluc to brcach of thc contract sans anagrccmcnt,} cxprcss or impliccl,^{by thc aggrievccl pafly rcccivingthc licluidatcd damagcs, ttl} rcfi-ain liorn or tolcratc^{an act or to clo anything lbr thc party paying thc licluiclatccl} clanragcs, ancl^{u,hcrc thc lic1r-riclatccJ clamagcsarc lrcrc [lou' o1-monc'yand clo ntlt} constitutc consiclcration^{lbr a supply arc not taxablc.What ncccls cxall'linationis} whcthcr thc irnpugnccl^{paymcntsconstitutc consirlcratittnltrr anothcr incicpclrclctrt} c'ntract cnvisaging^{tolcratingan act or situation or rcfi'aining florn doing any act or} situation or sirnply^{cloing an act. If the answcr is y'cs, thcn it constitutcsa'supply'} within thc tncaning of^{thc Act, othcrwisc it is not a "supply"'}

¶110

lg. 'l'hc appcllant's liability as workcd out in thc noticc of intcntion^to tcrn-tinate datccl^{13.5 .2A15,is as undcr}

Ilagc 7 of'l()

-t CONTRACTOR'S LIABII,ITY UPON TERMINATION

¶115

3.1 ln light of rhc mauers raised in Section 2 above. it^{is thc ANI')'s position that,upotr} tcrrninalion, the Contractor is liable to thc ANP lbr:

¶116

3.1.1 thc cstinrated ct'lsts o[ tlre l:xplorarion^{t]C]t carried out lbrthe Contract} Year 20ll (pursuiull tir r\rticle 4.5(aXiii) of^{thcPSC)in thc amountof} US$ 16.585,789.72; and

¶117

1.1.2 damages tbr brcach o[ irs tocal content obligation^{in thcanrountof US} $4 33,000.00;

¶118

thcrcby nraking rhc Cjontractor'.s total liability upon^{terrnination 1o be US$} n,418,789.',12.

¶119

7.2 As to the calculation of the estimated costs of^{Explorationnot carried outin the} Contract Ycar 2013, thcsc costs have^{bccn calculatedaslbllows.}

¶120

J._l The Exploration Work Progranrnrc^{andBudget for Contract Year 2013 stipuiateslltat} a budget of US$ 18,000.000^{u,asallocated towards tlredrilling of the third comrnittcd} wcll.

¶121

J -t+ The Contractor did^{notdrillthe thirdcommittedrvellin Contract Year 2013but} cxpcndcd the fbllowing^{amounls lorvardslhc same:}

¶122

3.4.I l)lanning and Supcrvision US$^{262,611'37;and}

¶123

3.,1.? Welll US$ I,l-s1.5(r9.12.

¶124

't< 'I'herefore, the Clontractor's Iiability lbr lhc estimated cost of Exploration nrtt carricd out in lhe 2013 Contract Year is US$ 18,000.000 - (US$ 262.641.37 + 955 l, I 5 1,569. I 2) is LIS$ t 6,.\85.789.72.

¶125

'l'hcrcaftcr, thc 'dcccl of scttlcmcnt and rclcasc' datcd 15.7 .2020,

¶126

signcd bctwccn ANI'} and thc conccssionaircs statc as lollows:

¶127

BACKGROUNT'

¶128

ATheClaimantandtheRespondentsareparticstothePSC.

¶129

B The Claimant^{commenced the Proceedings'}

¶130

C The^{partieshaveagreedtosettlelie Dispute, anddiscontinuethe Proceedings'on the teflnsset} out in this^deed.

¶131

D The First Respondent^{waranisthar the Firsf Respondenthasautloriry to sign thisdeedon} behall'of thc lhird. Fourth^{andFifth Respondents'}

¶132

t of USD 8,040,000,

¶133

,. SI!'ITLEI{ENT l'aYmcal^{ofScltlcrncrt} 'Srrnr

¶134

2t}J,,lfl li'#:T;';,tll::',ii:l;;il..l"i['J,"iiili:iti,[i['5,tr#J-s'# R"sponacnrsf,"ti iay^{ro rhc Claimlrnt!hc Sctdqncnt 5ur} 2.5 ofrhis^decd.

¶135

2 2^{'rlre Rcspordentssharr eachpal'therr} o1lliT::iY','rl'j|;i1;I;ffidlfl:["CJ:ffil ;:;[:li:-:Xi,ffi^{T"X'.]fi# ;:ilIi#ilJ'J ;irg}'ito p'v ontvis p*rportionatc slure o[thc Sc$lemcfll^{Sxmas tet out in ctaus€ 2'2(a) to(0:}

¶136

(a) First Rcs?oodpnt -^{l0% ofthc Sctiicrrte'llSurD;} ('t) Scconc Respondcrl -^{I 51/' of lhc Settlanent Su;:t:} (r) 1}ird ResponrSmt -^{2[}?o of theScttlcmaltSurrr;} t,l) fourth Rcspondtst^{,t-0fioflho Scttlerne0t Surn;}

¶137

{c) Fifth Respundcnt -^{?0%of lhc Sctdcmclrt Sun'';and} (r) Sixth Rrspoolcnl -^{I 5!6 oithe Scnlsmtat Sun}

¶138

2.l lhc First^{l(us;ron'icntrhrii p'ry iis srai: oflleScfilc'Le:rlSiltllllirs r-"Ilifllxnt in in'rtoltnents'} in tht smotnls^{ard by lhcd?(es$i} 'ifl^o'lbclo$

¶139

(.) $50,0CC^{tc br pltl*irhtn )3rlal's of lheElccutirn Dalt;} (lr) 52J0.U0'J^{tr: bcperd rvlrhI 3 nrr:rnthsoflheEr'ccutiorr Datc} (c) $250,000^{ro beprid u'ithia l?rnoctfisoitheE-reculicro Date;;rr11} (C) 3250,000 lo ht^{priC rvlthin 15 muslhscfthc Lrtcutir:r Drtc'}

¶140

2.4 Each of thc Strond^{Rrrp.ardcnt, lhcI'}irdltespondent, thc Founh Respotdent,iht.l'ifth} Rcrp0ndcnt errd the Sixth^{Rc\pordeflt shrllpaythcirsharcof the SenlcmcolSumwithinl4} d*ys ofthr Exccution^Dat:.

¶141

2-5 Payrnrnl shall bc cartc hy walr ofeleclronic^{li:ndrttansr'er lr13 ttre fo)ioq'igaccotlnti} Bnnk: Altslnlin {r.l Nc'Zelland^{Banlcilg Group Lrttited} 'Iirnq'Branch t,{NZ)

¶142

Account Narnc: ArtoriLlade Nrcional^rloPetrultoc lvlincrais 'Tl-.IPDA

¶143

Accounr Nor 1312'1'.

¶144

,t.--": ,lr' .'',/-.. j . . ','. , ' ,'i l: Pagc fl ol'l0

¶145

¶146

IBN: TL380030000000013^{I 27158}

¶147

and will bc lakcn to havc^{bccn nradc uponrcctipl of clearedfunrjr inlolhe ablve;1i:6r7rlfl[} Resolution of the Proceedings

¶148

Attnexure'

¶149

2.6 Bysigningthjsdecd,thepsrtiesagreetothEtennsoftheconscntArvard.iclr.:ttltrt A

¶150

2.7 UpontheExccutionDate.theClairrrarrtshallprornptlyseekordcrsfrorntltcTriburralinllrcfornr o[ tlrc Conscnt Arvard. '

¶151

As is' cvidcnt in^{this casc licluidatccl clamagcs arc paicl only trl} compensatc lor^{loss due to brcach of PSC in tcrms ol clausc a.5(a)(iii)'Wc havc} not bccn in a^{position to pinpointany agrccmcnt, cxprcss or implicd bctwccn ANI)} and thc six conccssionairc^{that on rcccivingthc liclr-ridatcclclamagcs,nNI) will} rcliain liorn or^{tolcr-atcan act or do an act for thc conccssionaircsIinclLrcling thc} appellant I paying^{thc liquidatcd damagcs. 'l'his bcing thc factual matrix,thc} licluiclatcd clamagcs,^{in tcnns of thc aforcmontioncd circular arc lxcrcly a flow ol-} moncy and such^{paylrcnts clo not constitutcconsidcration for a supply and hcncct,} arc not taxablc.^{On going thror-rgh the documcnts produccdbclorc us, it is dilficult} to cstablish that^{thc irnpugncd paymentsconstitutc considcration lor anothcr} inclcpclclcnt contract^{cnvisaging tolcrating an acl. or situationor rclraining[torl} tirirrg any act or^{situation ol'sirrply doing an acl. Noncthclcss,wc also llncl that} thc irr-rpugncd^{rulingclatccl 6.9.2021 crrcd in holcling that thc scttlcnlcnt amount} Iliquidatcd^{danragcslis not cluc to brcachin I'SC brrt duc to ANI'}s obligation trr} slrpply scrviccs^{to thc appcllant.}

¶152

20.1. Wc furthcr^{fincl that tl-rc issuc was clarificd vidc circttlar no. 17811012022-} GS'l' clatcd 3.g.2022^{which has bcen issucd conscclucnt to thc irnpugncdrurlir"rg} datcd 6.9.2021^.

¶153

2l . 'l'hc appcllant has rclicd upon nLrmcrous casc laws. Wc woulcl Iil<c ttr rcproclucc thc^rclcvatrt cxtrttct lrorn thc .jurdgcmcnt^{irr thc casc oI' Northcrtr} Coal {lclcls Ltd,^{sgpra, rvhich substantiatcsotrr llnclings etbo vc t)iz}

¶154

ln lhi,s connection^{it wrnilcl also be yterlinenllo re.fer to the Cir} cutlar clalec{ 03.0,5.2022 isstrcd^{b4; the l)eparlmento.f'llevenue regarcling upplic'tbil} i0' ct1 ro,,r,t apd service lctx^{9n licltticlttlecJr)amuges, cotl'tpensctlionanc{ penalty ar} ising ottt it-{ breach rt/'conrrgct^{itt lhe context o/',,a5yeeing to the obligcilion to re/r} 'ctin /i"ont ctn e ntphas ize^s ucl ot. lo lolerule^{t,tn ocl or ct silualion, or lb clrt on ctcl ,' 'l'his Circ:ailar} lhat lhere has lo^{be on expressor irnpliecl agreemenllrt clo rtr ahslain} /rom^doing somellting againsl ait acl or a situctlion^{ytuvgtenl conrtot of' be corts imagined ideralion or pre} .fb^{t' sttmecl u lcrxlble /o exisl .sr.tPPb' merelY lo exisl fi96'cr} .i,' is a.flow r{' mone.lt.irotlx^one Strtrflt^{to ctnother.It ctlso ntenlirtn,s thctt unl} hu,s iseen rttac{e ./itr^{ctlt inc{epenclenl crc'tivit.tt qllolerolittgut1 (tc}

LT ' 'l.f .ill l. ,.

inclependent arrangernenl enlerecl inlo /br such aclivily or lolerctling an acl, suc'li pavmenl will nctl conslilute,,corcsiderationll and s'uclt ctclivities v,ill nol cttnstiltrlc ,,supplyl ). T'he relevant porlion o/'the Circulcrr^{is reprochtcecl helovv:}

¶159

" Agreentettt lo do or ref roin fiom on uct shoulrl tutt be presttmed lo exisl

¶160

Thera ltus to be un express rtr implied ugreement: orul or written, to do or ultstnin .fi'otrt^{doin;; somethittllttguinstpuyntent o./'cottsideratiort.forrloittll or ubstrtittitrg} .f'roru^{suclt ucl,.fbr u tuxublesuppl.1,to exist. Att o!:reernentto do utt uct or oltstrtirt} .fi'ottr^{doingun uct or to tolerule on uct or u situtttiottctrnnotlte imoginerl ttr} pra.rttt',t(:rl lo c-risl .ju.st bcc'tttrsc therc is u.flow,o/'ntorte-1t.f'rom one purt.1'ltt utrttllttr. ltrtless tlrcre i.s trtt e-yprass or inrplied prontise b-y lhc recipiurt o.f nt(,ne-i: fut ugrei: li,t do or ubstuitr./i'otn doittl; somelhirrl4 irr return.fbr lha monc-lt ltuirl to ltim, il t'rtrtttrti bc ussttnted thut such pu.yment wosJor doini; utt ttct orJbr ra.fiainirtg.frum un ucl ttt' .fbr^{tolerutitty4 ctrt uct or sitttotion. I'ayments such us liquiduted dontulles.forhraaclt} oJ'contruct, penulties under the mining act./br excess slock found w,ith tlte mining cot tpony, Jb(biture qf sulary or poyntent o.f umounl us per the emytloyment ltond ./br^{leuving the employment beJitrethe minimurnugreedperiod,penulty} Jitr^clteqttc dishonour elc. ure nol u cotrsiclaration Jbr tolerating un acl or silttotiott.^'l'hey s1'a' rulher amotutl.; recoyerecl ./itt' nol /oleruling on ocl or ,;ilttcttion unc{ lo tleler ,s'ttc'lt crcl,s'; .s'uclt untounl,: ure.fbr prevenling breoch o.f'c'onlrucl or nonperfirmunca ontl ura lhu,s mere "evcnl,'' in u conlrucl. lrurlher,such antounls clo nol constilt,rle [)u))menl^(or' con.s'iclat'ulion.) fitr tolcruling cut ucl, bac'uu.s'e thcre cannol he uny c'onlrcrcl: (rt) lbr ltt'r,urh thttrt:of, ()t'(h) lbr ltolcling more.s'lock lhun lrcrmillccl Ltttt{er lltc mirtin;1 c'otttrtrc'1, or'(t') fitr leuving lha entpktvntcnt bcfora lhe ugt'eetl ntinimrrt,rr !tt't'irirl or^((l) litr tloing.s'orrtcthing^leutling lo^{lhc cli.shonottr of u chr:que. r'ls ltrusulreud.y-ltcctt} stuted, urtlass pu);ntent hos heen mude./br un indepenilettl trctiv'it-1, o./'lolerulirts tut rtt't trtrdar un inlapendent orronsemenl entered into./itr suc:h uctit,it-l' o/'tolcrrtlirt,g un ucl, suclt po)ltttctrts tpill ttot constitute'consiilerutiort'ttnd ltencc suclt uctir;ilics will rtol cortstitrtte "sttppl.y" tvitltin the meaning oJ'the Act."

¶161

(crnplrasis sLrpp I icri)

¶162

S incc wc l-ravc alrcady rulcd in lavour ol'thc appcllant, wc do not wish to discuss thc othcr casc laiws, rulings ctc., rclicd upon by thc appcllant, it bcing a nrcr(i rlcac]ur-r i c cxcrc i sc.

¶163

In rricw tll' thc {brcgoing, wc sct asidc thc Advancc I{uling No. (rtj.l/Cnntr{/f{ 150 2021 clatccl 6.9.2021 ol' thc Gn AR in thc casc o[' M/s. GSI'(] (.li'i)u) Ltci. Wc modily thc ruling ancl hold that GSI'}C (JPI)A) Ltcl., is not liablc io pay^(is'l'on scttlcmcnt lccs against dcrnand madc by ANP vidc lcttcr^datccl | 5 .7 .20 | 5 , subscclucntly scttlccl vidc I)ccd of Scttlcmcnt and Itclcasc^clatccl | 5.7 .2A20 in tcrms ol circular no. 17811012022-GSl' datcd 3.8.22 sincc' it^is I i c1 ui clatccl clarnagcs.

¶164

u ( lta.i.*r'',,pno ) Mcrnber (S(;S'l')

¶165

(li V Siva Nagzr I(umari) Mcm hcr (C(; Sl')

¶166

l)Iacc: Ahrlcclabacl l)atc:L?--01 .2025

¶167

I)agc l0 ol' l0

¶168

"t*JSsZ

GUJ/GAAAR/APPEAL/2025/02dt. 22.01.2025 of M/s. Gspc (Jpda) Ltd.

Case brief

What is this about?

What did the court decide?

GUJ/GAAAR/APPEAL/2025/02dt. 22.01.2025 of M/s. Gspc (Jpda) Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases