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TMI Blog2023 (4) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... Notice, Order-in-Original as well as the impugned Order-in-Appeal are that the appellant is a public sector undertaking engaged in the manufacture of heavy engineering equipment such as piping systems and pressure vessels for power generation systems and process industries and is also engaged in the service of erection / commissioning of power plants / projects. The appellant has thus got itself registered under the Finance Act, 1994 since its project implementing activities appeared to be categorized as 'service'. It appears that during the course of discharging of contractual obligations towards the customer relating to supply, erection, commissioning and installation activities, the appellant entered into agreements / contracts with ven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 66E (e) of the Act to be "agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;" and hence, agreeing to the obligation or to tolerate an act or situation would be a "declared service" for the purposes of the Act. He has thus held that the appellant had received Liquidated Damages from their suppliers of materials and providers of service where there had been some deficiency in such supply / provision, which was in breach of the contract, which was for tolerating the deficiencies. It is that 'toleration', according to the Commissioner, that was covered under Section 66E (e) ibid., which would partake the character of "declared service". 3. Feeling aggrieved, the appellant preferred f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) TMI 1092 - CESTAT, Chennai] (v) MNH Shakti Ltd. v. Commissioner, C.G.S.T. & C.Ex., Rourkela [2021 (11) TMI 427 - CESTAT, Kolkata]; (vi) K.N. Food Industries Pvt. Ltd. v. Commissioner of C.G.S.T. & C.Ex., Kanpur [2020 (38) G.S.T.L. 60 (Tri. - Allahabad)]; (vii) Khaira and Associates v. Commr. of Cus., C.Ex. & S.T., Bhopal [2020 (34) G.S.T.L. 224 (Tri. - Delhi)]; (viii) M/s. Amit Metaliks Ltd. v. Commissioner of C.G.S.T., Bolpur [2019 (11) TMI 183 - CESTAT, Kolkata]. 6.2 He would invite our attention to the order of the Delhi Bench of the Tribunal in the case of M/s. South Eastern Coalfields Ltd. (supra) and in particular, to the following observations: - "26. Thus, a service conceived in an agreement where one person, for a cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation" includes any amount that is payable for the taxable services provided or to be provided. The recovery of liquidated damages/penalty from other party cannot be said to be towards any service per se, since neither the appellant is carrying on any activity to receive compensation nor can there be any intention of the other party to breach or violate the contract and suffer 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 ST/50567/2019 other party complies with the terms of the contract and a penalty is imposed only if there is non-compliance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually arose or which the parties knew when they made the contract 'to be likely to result from the breach'. The Supreme Court also found that there was no evidence that any loss was suffered by the plaintiff in consequences of the default by the defendant, save as to the loss suffered by being kept out of possession of the property. The Supreme Court, therefore, held that plaintiff would be entitled to ST/50567/2019 retain only an amount of Rs. 1000/- that was received as earnest, out of amount of Rs. 25,000/-. 42. The conclusion drawn by the learned authorized representatives of the Department from the aforesaid decision of the Supreme Court that compensation received is 'synonymous' with 'tolerating' or that the Supreme Court acknowled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under Section 66E (e) of the Finance Act, was not sustainable. 10. We find that the said view has been followed in the other orders of CESTAT Benches which are relied upon by the Learned Advocate. 11. In view of the above, therefore, we are also of the clear view that the issue is required to be answered in favour of the assessee, for which reason the impugned order cannot sustain. 12. Consequently, the impugned order is set aside and the appeal is allowed with consequential benefits, if any, as per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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