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2019 (11) TMI 183 - AT - Service TaxDemand of service tax on receipt of amount for Cancellation of Development agreement - 'Declared Service’ under Section 66 E(e) of the Finance Act - whether the cancellation of the Development Agreement in terms of the Settlement Agreement would be liable to service tax under Section 66E (e) of the Finance Act and the other one is regarding non supply of iron ore from M/s Amit Mines, which resulted into payment of compensation would be chargeable to service tax within the said Section 66E(e) of the Finance Act? - HELD THAT:- It is not in dispute that the Development Agreement and Settlement Agreement has been concluded before the introduction of Section 66E (e) of the Act which deals with declared service. The declared service has been defined as “agreeing to obligation or to refrain from the act or to tolerate and act and situation or to do an act”. Learned Adjudicating Authority has concluded that the amount received by way of Settlement Agreement is agreeing to refrain from an act and thus chargeable to service tax. We find that these two activities have been rendered prior to introduction of declared service under the statue, and therefore, the same cannot be made applicable to the event that as concluded before the introduction of the new levy. This issue has also been decided held in case of Vistar Construction Pvt Ltd vs. Union of India [2013 (2) TMI 52 - DELHI HIGH COURT], wherein it is held that taxable event is rendition of service and hence the rate of tax applicable would be one on the date on which services were rendered but not on the date when payment is received. Thus, there is no justification in imposition of service tax liability on the Appellant, has been held in the impugned order. The declared service under 66E(e) was first introduced from 01.07.2012 while the agreements are prior to the said date. The rules cannot go beyond Act since the charge under Finance Act was not available on the date of agreements in question. The Rule 5 of the Point of Taxation Rule has thus no application in this case to create a change in an indirect way - we also find that the all payments have been received towards the compensation for non performance of contract and the same will not be within the definition of Section 66 E (e) of the Act, which is for obligation to refrain from the Act or to tolerate and act of situation by the service provider. The Appellant has not provided any service as the Development Agreement itself has been cancelled. So, there is no question of any liability towards the service tax on the payment. The compensation received by the appellant towards termination of Development Agreement is to be treated as actionable claim which is not liable to service tax in terms of Section 65B(44) of the Finance Act - once it is held that the Development Right is not service but it is benefit arising out of immovable property there is no scope of levy of service tax on the sum received out of the Settlement claim. Impugned order set aside - appeal allowed - decided in favor of appellant.
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