No GST on Amount Collected Towards Penalty Imposed by LPG Corporation for Non-Attendance of Leakage Complaint | HC

Case Details: Aswathy Gas Agencies v. Indian Oil Corporation Ltd. - 169 taxmann.com 740 (Kerala)

Judiciary and Counsel Details

• Harisankar V. Menon, J.
• R. Surendran & Kum. S. Mayukha, Advs. for the Petitioner.
• M. Gopikrishnan Nambiar, K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C. Abraham, E.K. Nandakumar, Smt. Ramola Nayanpally & Raja Kannan, Advs. for the Respondent.

Facts of the Case

In the present case, the writ petition was filed by the LPG distributors appointed by the LPG Corporation challenging the levy of penalty and GST on such penalties. The LPG Corporation imposed penalties on the distributors for not attending a leakage complaint as per Marketing Discipline Guidelines 2018. The GST department raised demand of GST on the amount of penalty. Aggrieved by the demand, the LPG distributors filed a writ petition before the Kerala High Court.

High Court Held

The Honorable High Court observed that the GST department’s contention relied on the argument that the penalties constituted a ‘supply of services’ by the LPG Corporation to the distributors. However, no ‘supply of service’ was affected by the LPG Corporation to the LPG distributors while imposing penalties. It clarified that, under GST law, the demand for GST can only arise if there is a supply of goods or services.

Further, the amounts sought to be recovered were not towards tolerating an act/situation. Instead, the amounts sought to be recovered were for not following the terms of the agreement/MDG framed by the LPG Corporation. Thus, the Kerala High Court held that the LPG Corporation was not entitled to collect GST from the LPG distributors.