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2022 (6) TMI 381 - AT - Service TaxLevy of Service Tax on amount of penalty (liquidated damages) collected from their contractor - to refrain from an act or to tolerate an act or a situation or to do an act - HELD THAT:- Under the facts and circumstances there is no contract between the appellant and their contractor - to refrain from an act or to tolerate an act or a situation or to do an act in favour of their contractor or to tolerate any act or situation. Further, for such alleged act or tolerance, no remuneration is prescribed in the contract. The amount of liquidated damages levied by the appellant from their contractor is in the nature of penalty, and not by way of any consideration for any service as defined under Section 66E(e). This Tribunal in the case of M/S LEMON TREE HOTEL VERSUS COMMISSIONER, GOODS & SERVICE TAX, CENTRAL EXCISE & CUSTOM [2019 (7) TMI 767 - CESTAT NEW DELHI] under the fact that their customer used to book accommodation by making advance payment, and upon cancellation of the booking, the hotel was retaining or forfeiting some of the advance deposit in the nature of penalty, by way of cancellation charges. This Tribunal held that the said amount collected by the hotel is in the nature of penalty, and not consideration as defined under Section 66E(e) of the Finance Act, 1994. Appeal allowed - decided in favor of appellant.
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