TMI Blog2022 (9) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of penalty/liquidated damages for non-compliance of contract, cannot be considered as consideration for tolerating an act and hence, not leviable to service tax under section 66E (e) of the Finance Act. Appeal allowed. - SERVICE TAX APPEAL NO. 30964 OF 2018 - FINAL ORDER No. A/30130/2022 - Dated:- 14-9-2022 - HON BLE SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) AND HON BLE SHRI. P. V. SUBBA RAO, MEMBER (TECHNICAL) For the Appellant : Shri C. Sumanth, Advocate For the Respondent : Shri A. Rangadham, Authorised Representative ORDER ANIL CHOUDHARY: The issue in this appeal is whether the demand of service tax has been rightly confirmed on liquidated damages/penalties recovered by the Appellant from its contracto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , invoking the extended period of limitation, on the ground that the penalty/liquidated damages recovered from the suppliers etc. is a declared service as per Section 65B (22) of the Finance Act, 1994 and therefore, falls under the scope of tolerate an act or a situation under section 66E(e) of the Act. Further alleged that the said amount would attract service tax, since these are penalties received from contractors/suppliers as income under separate head and cannot be considered as price or consideration of goods or services. Further alleged that these facts came to light on verification of records and hence extended period of limitation is invokable on the ground of wilful suppression of the facts. 4. The Appellant contested the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that no service tax is payable on the amount collected towards liquidated damages, following the ruling of the Tribunal in South Eastern Coalfields Ltd vs Commissioner of Central Excise Service Tax 2020 (12) TMI (912). In SECL, this Tribunal observed that such amounts collected by way of penalty/liquidated damages for non-compliance of contract, cannot be considered as consideration for tolerating an act and hence, not leviable to service tax under section 66E (e) of the Finance Act. The contracts nowhere provided obligation on the assessee to refrain from an act or tolerate an act or a situation and flow of consideration thereof. Such liquidated damages/penalty cannot be considered as receipts towards any service per say, since neit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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