The Authority for Advance Ruling held that If the service is already leviable under the provisions of service tax law, then there cannot be any tax under the provisions of CGST Act to such an extent.
Facts
The applicant M/s. TPSC (India) Private Limited is engaged in taking up Thermal Projects in various cities in India and during the financial year 2013-2014, the applicant company was allotted an Erection and Pre-Commissioning works related to Steam Turbine Generator and Auxiliaries, project of NTPC, Kudgi, Karnataka and duration of completion of the project was for (4) years upto 2017.
On the entire contract value, VAT and Service Tax were remitted by the Applicant Company. During the execution of the contract, the applicant Company gave sub-contract to various companies, who were also registered dealers in their respective states.
The Applicant Company submitted that due to the delay in the supply of Isometric drawings, raw materials, and IBR Pipes by the Applicant, the project completion was delayed.
The Applicant had engaged 4 other sub-contractors, to complete the work that had been unattended and descoped from the DGAL. Having not satisfied with the process and duration of the contract, DGAL issued a notice to proceed for Arbitration for compensation.
Submissions
Authorized representatives Lenin Ravi Bharath contended that they have issued two purchase orders to their sub-contractor M/s Delta Global Allied Ltd (DGAL) who have completed the execution beyond the time limit provided to them.
He argued that in view of Circular issued by Govt. of India, Ministry of Finance such compensation including the liquidated damages claimed for breach or non-performance of the contracts by one of the parties shall be exempted.
Decision
The division bench of S.V. Kasi Visweswara Rao, Additional Commissioner (State Taxes) and Sahil Inamdar IRS, Additional Commissioner (Central Taxes) observed that the applicant has not fulfilled his promise to award the total work to the sub-contractor as stipulated in their work order.
It further observed that there is a breach of contract by the applicant on which he has paid liquidated damages by way of out of court settlement.
The AAR ruled that the Taxability of the amicable settlement made by the parties to settle the entire award amount at Rs.38,56,91,204/- should be assessed as if that was done as per the award by the Tribunal for Arbitration as the mutual settlement between parties was done only based on the award by the Tribunal as stated by the applicant.
The bench held that as no supply has happened during the GST regime as per Section 142(10) of the act, no GST shall be payable. Further the additional payment received by way of compensation through award by Tribunal for Arbitration is not falling under Section 142(2)(a) and hence not chargeable to GST.
Case title: M/s. TPSC (India) Private Limited
Citation: TSAAR Order No.10/2023
