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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 ..... ective from 01.07.2012 - In the said case, the issue for consideration before the Tribunal was whether the assessee company was liable to pay service tax on the liquidated damages and penalty / forfeiture of earnest money deposit for recovery of amount due to non fulfilment of contractual agreement by one of the parties to the agreement. The Tribunal came to a conclusion that by collecting the penal amount as aforesaid, 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. The decision of the Tribunal is squarely applicable in the instant case also wherein the amount collected by the appellant by encash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Port. In terms of the said scheme as laid down in Office Order dated 07.01.2012 issued by the Traffic Department of Paradip Port Trust, a Minimum Guarantee Tonnage (MGT) has to be confirmed by the user failing which the user shall be penalised by way of encashment of Bank Guarantee for the equivalent wharfage in respect of the shortfall quantity of the MGT. 3. The Ld. Commissioner has given his findings in para 5.3 of the impugned order which reads as below: I fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tribunal including the following decisions to submit that the amount charged in the nature of penalty for non-fulfilment of the contractual obligations by the other party cannot be said towards provision of declared service under Section 66E(e) :- South Eastern Coalfields Ltd vs. Commissioner of Central Excise Service Tax, Raipur 2020-TIOL-1711-CESTAT-DEL M. P. Poorv Kshetra Vidyut Vitaran Co. Ltd vs. Pr. Commissioner, CGST, Bhopal 2021 (2) TMI 821 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eproduced 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 the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise. 24. What follows from the aforesaid decisions of the Supreme Court in Bhayana Builders and Intercontinental Consultants, and the decision of the Larger Bench of the Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 imposed only if there is non-compliance. 29. The situation would have been different if the party purchasing coal had an option to purchase coal from A or from B and if in such a situation A and B enter into an agreement that A would not supply coal to the appellant provided B paid some amount to it, then in such a case, it can be said that the activity may result in a deemed service contemplate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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