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2024 (6) TMI 766 - AT - Service TaxIssues involved: The issue involves the taxability of forfeited earnest money under Section 66E (e) of the Finance Act, 1994, and whether it amounts to a declared service. Summary: Issue 1: Taxability of forfeited earnest money The appellant, a PSU engaged in construction services, forfeited earnest money in financial year 2015-2016. The department proposed to recover an amount along with interest and penalty, considering it as an amount for rendering declared service under Section 66E (e) of the Finance Act. The order-in-original and order-in-appeal confirmed this proposal. The appellant contended that the forfeited amount was erroneously booked as income, later transferred to the sub-contractor, and not retained by the appellant. The appellant argued that forfeiture of earnest money does not constitute a declared service. The Tribunal referred to previous decisions and held that forfeiting earnest money does not amount to tolerating an act, thus not taxable under Section 66E (e). The appellant's liability for service tax was dismissed. Key Points: - Appellant forfeited earnest money in 2015-2016. - Department proposed recovery under Section 66E (e) of the Finance Act. - Appellant transferred forfeited amount to sub-contractor. - Tribunal held forfeiture of earnest money not a declared service. - Liability for service tax dismissed.
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