Top Stories GST Not Demandable in absence of any supply of goods/services: Kerala HC [Read Order] While confirming the findings in the impugned orders, the court declared that the respondent Corporation would not be entitled to collect tax under the provisions of the CGST Act 2017/SGST, Act 2017 from the petitioners. By Yogitha S. Yogesh – On January 10, 2025 2:16 pm – 4 mins read

In a recent case, the  High Court of Kerala has held that Goods and Service Tax ( GST ) is not demandable in absence of any supply of goods/services.While confirming the findings in the impugned orders, the court declared that the respondent Corporation would not be entitled to collect tax under the provisions of the CGST Act 2017/SGST, Act 2017 from the petitioners. These writ petitions are filed by distributors of LPG appointed by the 1st respondent herein challenging orders imposing penalty, appellate orders, as also the Marketing Discipline Guidelines, 2018 ( MDG ) under which the penalty is imposed. Become a PF & ESIC expert with our comprehensive course – Enroll Now The petitioners have further challenged the imposition of penalty in these cases as confirmed by the appellate authority.

The penalties were imposed by order issued by the 2nd respondent with respect to a complaint raised by a consumer/customer alleging non-attendance of a leakage complaint. The petitioner has raised a contention to the effect that there was no deliberate non-attendance of the complaint as alleged, that the complaint was received at its end only on 21.8.2020 by 4:33 pm, that the complaint was attended by the mechanic through a telephone call by 5:30 pm/5:45 pm etc. However, those contentions appear to have been properly adjudicated by the original authority and the appellate authority. In a writ jurisdiction, the appreciation of evidence in that regard cannot be carried out. In W.P(C) No.11912 of 2021, the penalty is imposed by order issued by the 2nd respondent. The allegation  is with reference to certain LPG connections provided by the petitioner. It appears that the explanations offered have been examined in detail by the original authority while issuing order.

The only other subsisting challenge arising for consideration in these writ petitions is as regards the demand of GST (Goods and Services Tax) by the impugned orders in these cases. While issuing order an amount of Rs.28242.45 has been imposed as GST and it is sought to be recovered from the petitioner. Sri. Surendran, the  counsel for the petitioners in these writ petitions would contend that the demand of GST as above was without any justification and arbitrary.  He points out that there is no “supply of service” so as to demand GST from the petitioners.

The  senior counsel, Sri.Nandakumar, on the other hand, relies on the counter affidavit filed as well as the Notification No.11/2017- CT(R) dated 28.6.2017 issued by the Ministry of Finance, Government of India, to support the demand for GST as above. Become a PF & ESIC expert with our comprehensive course – Enroll Now The goods and services tax is levied with reference to the provisions of the CGST Act, 2017/SGST Act, 2017 (the ‘Act’). The preamble to the aforesaid Act would show that the Act was introduced to make provisions for the levy and collection of tax on the “supply of goods or services or both”.  Therefore, it is to be proved that there is either: Supply of goods , Supply of services , Supply of both to demand GST.  There cannot be any dispute that there is no supply of goods involved in the case at hand.

The term “services” has been defined under Section 2(102) of the Act where ”services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. 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. Become a PF & ESIC expert with our comprehensive course – Enroll Now It was found that 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.

A single bench of Justice Harisankar V. Menon held that the respondents are not entitled to collect GST from the petitioners. While confirming the findings in the impugned orders, it is declared that the respondent Corporation would not be entitled to collect tax under the provisions of the CGST Act 2017/SGST, Act 2017 from the petitioners.