TMI Blog2023 (4) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... pe and ambit of Sections 65B (44), 66E (e) and 67 (1) of the Act and they have also analysed and applied various decisions of the Hon ble Apex Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [ 2018 (2) TMI 1325 - SUPREME COURT] , UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] and FATEH CHAND VERSUS BALKISHAN DAS [ 1963 (1) TMI 46 - SUPREME COURT] and thereafter, has concluded that the view of the Principal Commissioner therein that the penalty amount, forfeiture of earnest money deposit and liquidated damages received by the appellant therein towards consideration for tolerating an act as being amenable to Service Tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracts with vendors and/or sub-contractors for supply of various equipment / materials for erection, commissioning and installation thereof and time being the essence of contract, it is the duty of the appellant to complete the agreed projects within the prescribed time as per the terms agreed to in the contracts with its customers. 2.2 Entertaining a doubt, based on specific intelligence that the appellant is charging and recovering Liquidated Damages for delay in supply and service contract as per the written agreements between them but did not pay the Service Tax on it, it appears that there was an enquiry against the appellant by the Directorate General of Goods and Service Tax Intelligence (DGGI). As a follow-up action, Revenue app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant preferred first appeal before the Commissioner of G.S.T. and Central Excise (Appeals), Tiruchirappalli, who vide impugned Order-in-Appeal No. 111/2019-TRY(ST) dated 28.05.2019 having rejected the same, the present appeal has been filed by the appellant before this forum. 4. Heard Shri G. Natarajan, Learned Advocate for the appellant and Smt. Anandalakshmi Ganeshram, Learned Superintendent for the respondent. 5. After hearing both sides, we find that the only issue that is to be decided by us is: whether the Liquidated Damages received by the appellant for tolerating the delay would amount to declared service within the meaning of Section 66E (e) of the Act ibid., and consequently, whether the appellant would be liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ST/50567/2019 goods; and for availing various types of services. The consideration contemplated under the agreements was for such supply of coal, materials or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act and a penalty is imposed only if there is non-compliance. .... ..... 30. The activities, therefore, that are contemplated under section 66E (e), when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. ...... ..... ..... ..... ..... ..... 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 stipulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt that compensation received is synonymous with tolerating or that the Supreme Court acknowledged that in a breach of contract, one party tolerates an act or situation is not correct. 43. 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. 7. Per contra, the Learned Superintendent for the respondent (A.R.) would rely on the findings of the lower authorities. 8. We have heard both sides and we have perused the orders of the lower authorities; we have also gone th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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