2025 (1) TMI 333 - HC - GST

Challenge to orders imposing penalty, appellate orders, as also the Marketing Discipline Guidelines, 2018 (MDG) under which the penalty is imposed - non-attendance of a leakage complaint - HELD THAT - 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. 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. The respondents are not entitled to collect GST from the petitioners herein. Conclusion - Unless and until there is any such supply of goods/services, the question of demanding GST does not arise at all. Petition dismissed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core issues:

Whether the Marketing Discipline Guidelines, 2018 (MDG) under which penalties were imposed on LPG distributors are valid.
Whether the imposition of penalties on the petitioners by the respondent Corporation was justified.
Whether the demand for Goods and Services Tax (GST) on the penalties imposed is legally justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Marketing Discipline Guidelines, 2018 (MDG)

Relevant legal framework and precedents: The MDG were established to regulate the conduct of LPG distributors. The petitioners challenged these guidelines, arguing they were unfair and improperly applied.
Court's interpretation and reasoning: The court previously upheld the validity of the MDG in a related judgment (W.P(C) No.9331 of 2020), rejecting the petitioners' challenge.
Key evidence and findings: The court found that the MDG were properly established and applicable to the petitioners.
Application of law to facts: The court applied principles of administrative law, finding the guidelines were within the regulatory authority's power.
Treatment of competing arguments: The petitioners' arguments against the MDG were considered and dismissed based on prior rulings.
Conclusions: The court confirmed the validity of the MDG.

Issue 2: Justification of Penalties Imposed

Relevant legal framework and precedents: The penalties were imposed under the MDG for alleged non-compliance by the petitioners.
Court's interpretation and reasoning: The court found that the original and appellate authorities had properly adjudicated the evidence and contentions presented by the petitioners.
Key evidence and findings: The court noted that the petitioners' explanations were considered and found wanting by the authorities.
Application of law to facts: The court applied principles of administrative review, emphasizing the limited scope of writ jurisdiction in re-evaluating evidence.
Treatment of competing arguments: The petitioners' claims of improper penalty imposition were rejected as the authorities' decisions were supported by adequate reasoning.
Conclusions: The penalties were upheld as justified under the MDG.

Issue 3: Legality of GST Demand on Penalties

Relevant legal framework and precedents: The GST demand was based on the provisions of the CGST Act, 2017 and SGST Act, 2017, particularly concerning the "supply of services."
Court's interpretation and reasoning: The court scrutinized the definition of "services" and "supply" under the GST framework, concluding that the penalties did not constitute a supply of services.
Key evidence and findings: The court examined the absence of a service agreement or contract between the petitioners and the respondent Corporation that would justify GST imposition.
Application of law to facts: The court applied the statutory definitions and found no "supply of services" occurred, as the penalties were not for tolerating an act or situation.
Treatment of competing arguments: The respondent's reliance on a government notification to justify GST was countered by the court's interpretation of the statutory provisions.
Conclusions: The court ruled that GST could not be levied on the penalties, as no taxable supply of services occurred.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "Unless and until there is any such supply of goods/services, the question of demanding GST does not arise at all."
Core principles established: The court reinforced the principle that penalties do not constitute a taxable supply of services under GST law unless a specific service agreement exists.
Final determinations on each issue: The court upheld the validity of the MDG and the imposition of penalties but ruled against the GST demand on those penalties.

In conclusion, the court dismissed the writ petitions, confirming the penalties but declaring the GST demands as unjustified under the CGST/SGST Acts.

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