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TMI Blog2022 (2) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... n 66E(e) of the Finance Act, 1994, for the period 2013-14 as proposed in the Show Cause Notice dated 01.08.2016. 2. Briefly stated, the facts of the case are that the Appellant is an autonomous body under the Ministry of Ports, Shipping & Waterways, Government of India, and is engaged in providing Port services. The consideration for various services e.g., pilotage, berth hire, licence fees for plot, etc, are recovered by the Appellant in terms of Scale of Rates notified by the Tariff Authority of Major Ports and applicable service tax is being charged and deposited by the Appellant, a fact which is not in dispute. The Appellant has devised a scheme, known as Berth Reservation Scheme, to accord priority berthing of specified users in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct or a situation, or to do an act, has bene declared as a service. Refrain means to keep oneself from one act or feeling from a particular thing that somebody does.... Thus forfeiting the amount by the Noticee, which was received from the MGT providers, in lieu of the Agreement / Order, amounts to tolerating of an act or a situation and hence the amount forfeited by the Noticee, is liable to Service Tax and the activity falls under the purview of Section 66E(e) of the Finance Act, 1994." 4. We have heard Sri Pulak Saha, Chartered Accountant and Sri K. Chowdhury, Ld. Departmental Representative, through Video Conferencing and perused the appeal records. 5. The Ld. CA appearing for the Appellant relied on various decisions of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said, it is not the intention of the assessee to tolerate the non performance of the obligation which was cast upon him as per the commercial contract entered by the assessee with the other party. Rather it was the intention of the assessee that the other party should comply with the contractual obligations and the penal amount was charged only to deter the other party from violating the contractual terms. The relevant portion of the decision is reproduced below: "23. It would, therefore, be appropriate to examine the definition of ―consideration in section 2(d) of the Contract Act, as the Contract Act deals with all kinds of contracts and predates the Finance Act. The definition of "consideration" is as follows:- 2(d) When, at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lared services contemplated under section 66E is a service contemplated under clause (e) which service is agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act. There has, therefore, to be a flow of consideration from one person to another when one person agrees to the obligation to refrain from an act, or to tolerate an act, or a situation, or to do an act. In other words, the agreement should not only specify the activity to be carried out by a person for 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation (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 damages/penalty from other party cannot be said to be towards any service per se, since neither the appellant is carrying on any activity to receive compensation nor can there be any intention of the other party to breach or violate the contract and suffer a loss. The purpose of imposing compensation or penalty is to ensure that the defaulting act is not undertaken or repeated and the same cannot be said to be towards toleration of the defaulting party. The expectation of the appellant is that the other party complies with the terms of the contract and a penalty is impos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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