TMI BlogNo Service Tax payable on the liquidated damages received in the nature of penaltyX X X X Extracts X X X X X X X X Extracts X X X X ..... No Service Tax payable on the liquidated damages received in the nature of penalty - By: - CA Bimal Jain - Service Tax - Dated:- 18-6-2022 - - The CESTAT, Delhi in M.P. AUDYOGIK KENDRA VIKAS NIGAM (INDORE) LIMITED VERSUS COMMISSIONER, CENTRAL GOODS, SERVICE TAX AND CENTRAL EXCISE, INDORE [2022 (6) TMI 381 - CESTAT NEW DELHI] set aside the order of the Revenue Department demanding Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice Tax on the amount of liquidated damages. Held that, Service Tax is not payable on liquidated damages collected in the nature of penalty. Facts : M.P. Audyogik Kendra Vikas Nigam ( the Appellant ) is engaged in providing taxable services under the head renting of Immovable Properties, Legal Consultancy, Manpower Supply Service etc. . A Show Cause Notice ( SCN ) dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 04, 2019 was issued by the Commissioner, Central Goods, Service Tax and Central Excise ( the Respondent ) demanding Service Tax under Section 66E(e) of the Finance Act 1994 ( Finance Act ) on the charges of penalty levied and collected by the Appellant from their contractors. The SCN was adjudicated on contest and the proposed demands was confirmed vide Order-in-Original ( OIO ), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with equal amount of penalty under Section 78 of the Finance Act. Subsequently, the Appellant preferred an appeal before the Commissioner (Appeals) who vide the Order-in-Appeal ( the Impugned Order ) upheld the OIO. Being aggrieved, the present appeal has been filed. The Appellant contended that that there was no agreement between the Appellant and their contractors, to perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the act mentioned in Section 66E(e) of the Finance Act. Issue: Whether the Appellant is liable to pay Service Tax on the liquidated damages recovered from their contractors? Held: The CESTAT, Delhi in M.P. AUDYOGIK KENDRA VIKAS NIGAM (INDORE) LIMITED VERSUS COMMISSIONER, CENTRAL GOODS, SERVICE TAX AND CENTRAL EXCISE, INDORE [2022 (6) TMI 381 - CESTAT NEW ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DELHI] held as under: Noted that, as per Section 66E(e) of the Finance Act, a declared service means agreeing to the obligation to refrain from an act, to tolerate an act or a situation, or to do an act. Further noted that, there is no contract between the Appellant and their contractors to refrain from an act or to tolerate an act or a situation or to do an act in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of their contractors or to tolerate any act or situation. Further, for such alleged act or tolerance, no remuneration is prescribed in the contract. Observed that, the amount of liquidated damages levied by the Appellant against their contractors was in the nature of penalty and not by way of any consideration for any service defined under Section 66E(e) of the Finance Act . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Set aside the Impugned Order. Held that, the Appellant has not received amount for any service under as defined in Section 66E(e) of the Finance Act . Thus, the Appellant is entitled to consequential benefits . (Author can be reached at info@a2ztaxcorp.com ) - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... managementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
