ORDER

No.07/2022 dated 16.02.2022 passed by the Telangana State Authority for Advance Ruling – Order-in- Appeal passed – Regarding. * * * * *

1. The subject appeal has been filed under Section 100 (1) of the Telangana Goods and Services Tax Act, 2017 (hereinafter referred to as “TGST Act, 2017” or “the Act”, in short) by M/s. Achampet Solar Private Limited, Hyderabad 8-2-610/68/1,2,3, 5th Floor, Accord Blu, Road No 10, Banjara Hills, Hyderabad, Telangana – 500034, (hereinafter referred in short as ‘the appellant’ or ‘Achampet Solar’ ). The appellant is not registered under GST has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 ofCGST/TGST Rules. The appeal is filed against the Order No.07/2022dated 16.02.2022 (“impugned order”) passed by the Telangana State Authority for Advance Ruling (Goods and Services Tax) (herein after referred as “Advance Ruling Authority” / “AAR” / “lower Authority”).

Brief Facts: 2. M/s. Achampet Solar Private Limited is engaged in production and distribution of electricity obtained from solar energy. They have engagedM/s. Belectric India (P) Ltd for construction of solar power project. The agreement has clauses for recovery of liquidated damages on (2) counts, one delay in delivering of the contract and the other regarding non- performance of the plant. The applicant is desirous of ascertaining exigibility of liquidated damages to GST on account of delay incommissioning and its time of supply. Hence this application. Questions raised:

1. Whether liquidated damages recoverable by the applicant from Belectric India on account of delay in commissioning, qualify as a ‘supply’ under the GST law, thereby attracting the levy of GST?2. If the answer to Question No. 1 is in the affirmative, what should be the time of supply when liability to pay GST is triggered?

3. Liquidated damages are demanded by the applicant from the contractor due to the delay in commissioning of the project and postponement in the taking over date beyond the milestones fixed for completion of project.

4. When the parties to a contract specify the time for its performance, it is expected that either party will perform his obligation at the stipulated time. But if one of them fails to do so, the question arises what is the effect upon the contract. This scenario is answered by Section 55 of the Indian Contract Act, 1872, which is extracted below:

“Effect of failure to perform at fixed time, in contract in which time is essential-When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee if the intention of the parties was that time should be of the essence of the contract.

Effect of such failure when time is not essential.-If it was not the intension of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.

Effect of acceptance of performance at time other than that agreed upon-If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so”.

A combined reading of the provisions (1) & (3) of Section 55 of the Indian Contract Act, 1872 reveals that a failure to perform the contract at the agreed time renders it voidable at the option of the opposi