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2022 (5) TMI 255 - AT - Service TaxLevy of service tax - liquidated damages/penalty collected for non-compliance of the terms of the contracts - Appellant had agreed to tolerate breach of timelines stipulated in the contract - delay in delivery terms as per Price Reduction Schedule (PRS) - HELD THAT:- There is substance in the submission advanced by the learned counsel for the Appellant that no service tax is payable on the amount collected towards delay in delivery as this issue has been decided by the Tribunal in favour of the Appellant in M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [2020 (12) TMI 912 - CESTAT NEW DELHI]. Various commercial contacts had been executed by South Eastern Coalfields and certain clause provided for levy of penalty for non-observance / breach of the terms of the contract. A show cause notice was issued with an allegation that the amount charged by the Appellant during the period from July 2012 to March 2016 appeared to be taxable as a “declared services’ under Section 66E(e) of the Finance Act. The Principal Commissioner, however, did not accept the contention advanced on behalf of the Appellant and confirmed the demand of service tax holding that the amount received by the said appellant towards penalty, earnest money deposit forfeiture and liquidated damages would tantamount to a consideration “for tolerating an act” on the part of the buyers of coal/contractors, for which service tax would be levied under section 66 E(e) of the Finance Act. It is not possible to sustain the view taken by the Commissioner that since the delivery was not made within the time schedule, the Appellant agreed to tolerate the same for a consideration in the form of delay in delivery charges, which would be subjected to service tax under section 66E(e) of the Finance Act. Interest - penalty - HELD THAT:- As service tax could not be levied, the imposition of interest and penalty also cannot be sustained. Appeal allowed - decided in favor of appellant.
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