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2022 (9) TMI 1587 - CESTAT HYDERABADWhether demand of service tax rightly confirmed on liquidated damages/penalties recovered by the Appellant u/s 66E (e) of the Finance Act 1994 - Appellant is a PSU - Manufacture of heavy power electrical equipment - HELD THAT:- The Tribunal in South Eastern Coalfields Ltd vs Commissioner of Central Excise & Service Tax [2020 (12) TMI 912 - CESTAT NEW DELHI] observed that such amounts collected by way of penalty/liquidated damages for non-compliance of contract, cannot be considered as consideration for tolerating an act and hence, not leviable to service tax u/s 66E (e) of the Finance Act. The contracts nowhere provided obligation on the assessee to refrain from an act or tolerate an act or a situation and flow of consideration thereof. Such liquidated damages/penalty cannot be considered as receipts towards any service per say, since neither assessee is carrying on any activity to receive compensation nor there can be an intention of other party to breach or violate the contract and suffer a loss. This Tribunal relied on the ruling of Hon'ble Supreme Court in Tara Chand vs Balkishan [1963 (1) TMI 46 - SUPREME COURT]. Thus, we find that the issue herein is squarely covered in favour of the Appellant-assessee by the precedent order of this Tribunal in South Easter Coal Field Ltd vs CCE and ST (supra). Accordingly, we allow the appeal and set aside the impugned order. The appellant shall be entitled to consequential benefits, in accordance with law.
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