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TMI Blog2024 (1) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... he failure to procure the power at contractual quantity is not a "declared service " covered under Section 66E(e) of the Finance Act, 1994 (hereinafter referred to as the Act). 2. Briefly stated the facts are that the appellant is engaged in manufacturing, Aluminium and Generating Power in the captive power plant for own usage and also for sale in the market for which they entered into Power Sale/Purchase Agreement (PSA/PPA) with M/s M. P. Power Management Co. Ltd. through M/s PTC India Ltd. (PTC). As per clause 3.3.4 of the said PSA/PPA, in case M/s PTC India Ltd. fails to procure the power at contractual quantity, it will compensate the appellant by paying 100 Paise/Kwh for the difference/shortage in quantity as compensation. Relevant cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atest Circular No.214/1/2023- ST dated 28.02.2023, where CBIC clarified that activities contemplated under Section 66E(e) i.e., when one party agrees to refrain from an act, or to tolerate an act, or a situation, or to do an act, are the activities, where the agreement specifically refers to such an agreement and there is a flow of consideration for this activity. He, accordingly prayed that the impugned order needs to be set aside. The learned Authorised Representative for the Revenue reiterated the findings of the impugned order. 5. We have heard both the sides and perused the records and the decisions cited at the bar. The decision of the Tribunal in South Eastern Coalfields (supra) dealt with the issue, which had arisen in similar situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in the nature of providing a safeguard to the commercial interest of the appellant and it cannot, by any stretch of imagination, be said that recovering any sum by invoking the penalty clauses is the reason behind the execution of the contract for an agreed consideration. It is not the intention of the appellant to impose any penalty upon the other party nor is it the intention of the other party to get penalized. 28. It also needs to be noted that Section 65B(44) defines "service" to mean any activity carried out by a person for another for consideration. Explanation (a) to Section 67 provides that "consideration" includes any amount that is payable for the taxable services provided or to be provided. The recovery of liquidated damage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricity and in the event he procured less than the minimum quantum compensation has to be worked out. This is only a "condition of the contract" and cannot be termed as "consideration for the contract". The underline object of the contract is to provide the services of electricity on requisite consideration and the compensation under clause 3.3.4 is distinct as the purpose thereof is to ensure that the minimum quantity of power is procured and there is no default. Therefore, the amount received as compensation has no nexus to the taxable service and cannot be treated as value of the services that are provided. In this regard, the provisions of Section 67 of the Act needs to be considered which provides that service tax is chargeable on any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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