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TMI Blog2021 (7) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 66E(e) of the Finance Act. Thus, in view of the aforesaid decisions of the Tribunal, it is not possible to sustain the view taken by the Commissioner that since the task was not completed within the time schedule, the appellant agreed to tolerate the same for a consideration in the form of liquidated damages, which would be subjected to service tax under section 66E(e) of the Finance Act. Interest - penalty - HELD THAT:- As service tax could not be levied, the imposition of interest and penalty also cannot be sustained. Appeal allowed - decided in favor of appellant. - SERVICE TAX APPEAL NO. 40052 OF 2019 - FINAL ORDER No. 41707/2021 - Dated:- 26-7-2021 - MR. JUSTICE DILIP GUPTA, PRESIDENT AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Ms. Krithika Jaganathan, Advocate for the Appellant Shri Balakumar and Shri L. Nandakumar Authorized Representatives of the Department ORDER M/s. Steel Authority of India Limited, Salem [the appellant] , which is a Public Sector Undertaking engaged in the manufacture of carbon steel, carbon steel sheet, coin blanks and alloy steel has sought the quashing of the order dated 04.10.2018 passed by the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on the said service provided by them for the period 01.07.2012 to 30.12.2015 should not be demanded from them under proviso to Section 73(1) of the Finance Act, 1994; iii) the applicable interest at the applicable rates should not be recovered from them under Section 75 of the Finance Act 1994 on the Service Tax amount as mention in (ii) above; iv) Penalty should not be imposed on them under Section 78 ibid. 6. The appellant submitted a detailed reply dated 18.07.2017 to the aforesaid show cause notice with a request that the proceedings may be dropped for the reason that no service tax was payable on liquidated damages and penalties recovered under the contract. 7. The Assistant Commissioner, however, did not accept the contentions of the appellant and confirmed the demand of service tax by invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act with interest and penalty. 8. Feeling aggrieved, the appellant filed an appeal before the Commissioner (Appeals) who by order dated 04.10.2018 upheld the order passed by the Assistant Commissioner and dismissed the appeal. The relevant portion of the order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the amount of liquidated damages/penalty collected for non-compliance of the terms of the contracts cannot be subjected to levy of service tax; and (iii) Reliance has also been placed on a Larger Bench decision of the Tribunal in Commissioner of Service Tax, Chennai vs. REPCO Home Finance Ltd. [2020 (42) G.S.T.L. 104 (Tri. LB)] , wherein it has been held that foreclosure charges collected by banks from borrowers for premature closure of loan account are not consideration for banking services as foreclosure charges are damages collected for breach of terms and conditions in the loan agreement and cannot be construed as consideration for banking and other financial services. 10. Shri Balakumar and Shri L. NandKumar learned Authorized Representatives appearing for the Department have, however, supported the impugned orders and have submitted that they do not call for any interference as the demands have been confirmed in accordance with the provisions of section 66E(e) of the Finance Act. 11. The submissions advanced by the learned counsel for the appellant and the learned Authorized Representatives of the Department have been considered. 12. There is substanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r another person but should specify the:(i) consideration for agreeing to the obligation to refrain from an act; or (ii) consideration for agreeing to tolerate an act or a situation; or (iii) consideration to do an act. 26. Thus, a service conceived in an agreement where one person, for a consideration, agrees to an obligation to refrain from an act, would be a declared service under section 66E(e) read with section 65B (44) and would be taxable under section 68 at the rate specified in section 66B. Likewise, there can be services conceived in agreements in relation to the other two activities referred to in section 66E(e). 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 of services. The consideration contemplated under the agreements was for such supply of coal, materials or for availing various types of services. The intention of the parties certainly was not for flouting the terms of the agreement so that the penal clauses get attracted. The penal clauses are in the nature of providing a ..... 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