2023 (9) TMI 654 - AT - Service Tax

Non-payment of service tax - liquidated damages - charging and recovering liquidated damages from the outstanding payment due to suppliers / service providers for delay in supply contract and service contract, but tax not paid - HELD THAT - Circular No. 214/1/2023-Service Tax dated 28.02.2023 relied upon by the Ld. Advocate wherein the Board has chosen not to pursue Civil Appeals filed by the Department against some of the Orders of the Tribunal before the Hon ble Supreme Court considered. The contentions of the Ld. Advocate agreed upon that the demand of Service Tax on liquidated damages has been set aside in those orders. Appeal allowed.

Summary

Issues involved:
The issue involves the demand of Service Tax on liquidated damages recovered by the appellant.

Summary:

Issue 1: Service Tax on liquidated damages
The appellant was paying Service Tax under forward charge on various services and under reverse charge mechanism as a service recipient. The Revenue initiated an inquiry based on intelligence that the appellant was not paying Service Tax on liquidated damages recovered from suppliers for delay in supply or service contracts. A Show Cause Notice was issued proposing demands for Service Tax, interest, and penalties. The appellant denied tax liability on the liquidated damages. The Commissioner confirmed the demands in the Order-in-Original, leading to the present appeal.

Decision:
During the hearing, the appellant cited several orders where demand of Service Tax on liquidated damages was set aside in favor of taxpayers. The appellant also referred to a Circular accepting the views of the CESTAT on this matter. The Tribunal, after considering the orders and the Circular, set aside the impugned order and the demand, allowing the appeal with consequential benefits as per law.