TMI Blog2022 (9) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal in M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. Vs. Principal Commissioner, CGST And Central Excise, Bhopal [ 2021 (2) TMI 821 - CESTAT NEW DELHI ], where it was held that It is, therefore, not possible to sustain the view taken by the Principal Commissioner that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards consideration for tolerating an act leviable to service tax under section 66E(e) of the Finance Act. The liquidated damages collected by the appellant as penalty/late delivery charges cannot be subjected to service tax under section 66E (e) of the Finance Act. Appeal allowed - decided in favor of appellant. - Service Tax Appeal No. 50080 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice dated 15.09.2017 was issued to the appellant mentioning therein that the appellant was charging and collecting amount in the name of penalty/late delivery charges from the contractors/material supplier on account of delay in supply of goods, delay in execution of work but the appellant was not making payment of the service tax under section 66E (e) of the Finance Act on this amount. The appellant filed a reply denying the allegations made in the show cause notice but the Commissioner, by the order dated 28.09.2018, confirmed the demand of service tax. 5. Shri Z.U. Alvi, learned counsel appearing for the appellant has submitted that this issue as to whether the amount collected towards liquidated charges can be subjected to ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uffer a loss. The purpose of imposing compensation or penalty is to ensure that the defaulting act is not undertaken or repeated and the same cannot be said to be towards toleration of the defaulting party. The expectation of the appellant is that the other party complies with the terms of the contract and a penalty is imposed only if there is non-compliance. 40 . It is in this context and in the context of Section 74 of the Contract Act, that the Supreme Court observed : 20. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of parties pre-determined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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