TMI Blog2021 (7) TMI 1090X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act. In view of the aforesaid decisions of the Tribunal, it is not possible to sustain the view taken by the Commissioner that since BHEL did not complete the task within the time schedule, the appellant agreed to tolerate the same for a consideration in the form of liquidated damages, which would be subjected to service tax under section 66E(e) of the Finance Act. 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 - ST/41666/2016, ST/41747/2016, ST/41427/2018, ST/41428/2018 & ST/42203/2018 - FINAL ORDER Nos. 41702-41706/2021 - Dated:- 26-7-2021 - MR. DILIP GUPTA, PRESIDENT AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Ms. Krithika Jaganathan, Advocate for the Appellant Shri Balakumar and Shri L. NandaKumar, Authorized Representatives of the Department ORDER The dispute in all the five appeals relates to demand of service tax on liquidated damages recovered by the appellant for acts of default, like delayed or deficient supplies by various suppliers. 2. The period involved in all the appeals is after 01.07.2012 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be recovered from them under proviso to Section 73(1) of the Finance Act, 1994; (b) appropriate interest should not be charged on the said amount under Section 75 of the Finance Act, 1994; (c) Penalty should not be imposed on them under Section 76 and 78 of the Finance Act, 1994. 6. Similar show cause notices were issued containing the same allegations. 7. The details of the period of dispute, the demand proposed, various sections under which penalty was imposed and the date of impugned order in the five appeals is provided in the following chart: S. No. Appeal No. Date of Impugned Order Period Demand (INR) Penalty (Sections) 1. 41666/2016 04.05.2016 2012-2015 8,52,58,879 76,78 2. 41747/2016 20.06.2016 2012-2014 3,66,58,998 76,78 3. 41427/2018 20.02.2018 2014-2015 1,21,37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HI]; (ii) Reliance has also been placed on the decision of the Tribunal M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. vs. Principal Commissioner CGST Central Excise Bhopal [2021 (2) TMI 821 CESTAT NEW DELHI] , in support of the contention that the amount of liquidated damages/penalty collected for non-compliance of the terms of the contracts cannot be subjected to levy of service tax; and (iii) Reliance has also been placed on a Larger Bench decision of the Tribunal in Commissioner of Service Tax, Chennai vs. REPCO Home Finance Ltd. [2020 (42) G.S.T.L. 104 (Tri. LB)] , wherein it has been held that foreclosure charges collected by banks from borrowers for premature closure of loan account are not consideration for banking services as foreclosure charges are damages collected for breach of terms and conditions in the loan agreement and cannot be construed as consideration for banking and other financial services. 11. Shri Balakumar and Shri L. NandKumar learned Authorized Representatives appearing for the Department have, however, supported the impugned orders and have submitted that they do not call for any interference as the demands have been confirmed in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration from one person to another when one person agrees to the obligation to refrain from an act, or to tolerate an act, or a situation, or to do an act. In other words, the agreement should not only specify the activity to be carried out by a person for another person but should specify the: (i) consideration for agreeing to the obligation to refrain from an act; or (ii) consideration for agreeing to tolerate an act or a situation; or (iii) consideration to do an act. 26. Thus, a service conceived in an agreement where one person, for a consideration, agrees to an obligation to refrain from an act, would be a declared service under section 66E(e) read with section 65B (44) and would be taxable under section 68 at the rate specified in section 66B. Likewise, there can be services conceived in agreements in relation to the other two activities referred to in section 66E(e). 27. It is trite that an agreement has to be read as a whole so as to gather the intention of the parties. The intention of the appellant and the parties was for supply of coal; for supply of goods; and for availing various types of services. The consideration contemplated under the agreements ..... X X X X Extracts X X X X X X X X Extracts X X X X
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