TMI Blog2023 (5) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... TH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [ 2020 (12) TMI 912 - CESTAT NEW DELHI] , the Tribunal held that liquidated damages recovered on account of breach or non-performance of contract are not consideration in view of any service but are in the nature of deterrent imposed so that such a breach or non-performance is not repeated. The Circular dated 28.02.2023 issued by the Central Board of Indirect Tax and Customs also provides that service tax cannot be levied on the amount collected for the said purpose. It is, therefore, not possible to sustain the demand - Impugned order set aside - appeal allowed. - Service Tax Appeal No. 50494 of 2019 - FINAL ORDER NO. 50711/2023 - Dated:- 22-5- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable under clause (e) of section 66E of the Finance Act. 6. In South Eastern Coalfields Vs. Commissioner of Central Excise and Service Tax [ 2020 (12) TMI 912-CESTAT, New Delhi ], the Tribunal held that liquidated damages recovered on account of breach or non-performance of contract are not consideration in view of any service but are in the nature of deterrent imposed so that such a breach or non-performance is not repeated. The relevant paragraphs of the decision of the Tribunal are reproduced below: 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 goods; and for availing various types o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pectation 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. 29. The situation would have been different if the party purchasing coal had an option to purchase coal from A or from B and if in such a situation A and B enter into an agreement that A would not supply coal to the appellant provided B paid some amount to it, then in such a case, it can be said that the activity may result in a deemed service contemplated under section 66E (e). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n right. There must be a necessary and sufficient nexus between the supply ( i.e. agreement to do or to abstain from doing something ) and the consideration. 5. The issue also came up in the CESTAT in Appeal No. ST/50080 of 2019 in the case of M/s Dy. GM (Finance) Bharat Heavy Electricals Ltd in which the Hon'ble Tribunal relied on the judgment of divisional bench in case of M/s South Eastern Coal Fields Ltd Vs. CCE Raipur (2021 (55) G.S.T.L 549(Tri-Del)). Board has decided not to file appeal against the CESTAT order ST/A/50879/2022-CU[DB] dated 20.09.2022 in this case and also against Order A/85713/2022 dated 12.8.2022 in case of M/s Western Coalfields Ltd. Further, Board has decided not to pursue the Civil Appeals filed before t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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