9911796707
TMI Blog2022 (5) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... failure to achieve the MGT and also (2) to discourage the service recipient from repeatedly breaching the terms and conditions of the Agreement dated 12.07.2011 and the penal clause is invoked only in cases where the service recipient does not adhere to the contractual condition of MGT as per Agreement dated 12.07.2011. As per Finance Act, 1994, the basic element to charge Service Tax is the element of service i.e. there should be an activity in the form of service or declared service. However, in the instant case, the said amount has not been collected towards any activity liable for Service Tax but as compensation/penalty for breach of terms and conditions of the contract [Agreement dated 12.07.2011] i.e. non-compliance of MGT. Thus, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus not leviable on Service Tax in terms of Section 66E(e) of the Finance Act, 1994 - reliance can be placed in the case of M/S K.N. FOOD INDUSTRIES PVT. LTD. VERSUS THE COMMISSIONER OF CGST CENTRAL EXCISE, KANPUR [ 2020 (1) TMI 6 - CESTAT ALLAHABAD] and M/S LEMON TREE HOTEL VERSUS COMMISSIONER, GOODS SERVICE TAX, CENTRAL EXCISE CUSTOM [ 2019 (7) TMI 767 - CESTAT NEW DELHI] . Appeal allowed - decided in favor of appellant. X X X X Extracts X X X X X X X X Extracts X X X X ..... l period as well as for extended period of limitation along with equivalent penalty holding that the said activity amounts to a 'declared service' under Section 66E(e) of the Finance Act, 1994. Hence the present Appeal before the Tribunal. 3. The core issue thus relates to whether the liquidated damages/'compensation charges' received by the Appellant towards the breach and non-compliance of 'MGT' as per Agreement dated 12.07.2011 can be viewed as 'consideration' for "declared service" as contemplated under Section 66E(e) of Finance Act, 1994 for the purpose of charging Service Tax. 4. Heard both sides through video conferencing and perused the Appeal records. 5. We find that penalty clause is provided in the impugned Agreement dated 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a concurrence to assume an obligation to refrain from an act or tolerate an act etc. which is clearly absent in the present case. 8. We find that, in the instant case, the parties entered into the said Agreement dated 12.07.2011 for import of a specified quantity of coal and for availing various port services for the same and not for flouting the terms of the agreement so that the penal clauses were the reason for the execution of the Agreement dated 12.07.2011 for an agreed consideration. It is only in situations where the condition of 'MGT' is not satisfied by the service recipient, the Appellant's claim for penalty/compensation/liquidated damages as contemplated in Para 6.5.3 of the Agreement dated 12.07.2011 arises so as to make good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the amount charged has to be necessarily a consideration for the taxable service provided under the Finance Act. In the instant case, the compensation received for making good the financial damages/injury cannot be said to be 'consideration' at all and has no nexus with any taxable service. Reliance in this regard is placed on the decision in the case of M/s.K.N.Food Industries Pvt.Ltd. v. Commissioner of CGST & Central Excise, Kanpur [2019-VII-731- CESTAT-ALH-ST]. 11. We find that as held by the Tribunal in M/s.SouthEastern Coalfields Ltd. v. CCE & ST, Raipur (supra), there is marked distinction between "conditions to a contract" and "considerations for the contract". A service recipient may be required to fulfill certain conditions co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deciding whether Service Tax liability arises on the UI Charges received by the Company in terms of Section 66E(e) of the Finance Act, 1994, the Court held that UI Charges have been received by the Appellant only in those cases where the buyer has drawn more electricity than what was scheduled for him and does not amount to consideration for declared service. (iii) M/s. Lemon Tree Hotels v. Commissioner, GST, Central Excise & Customs [2019 (7) TMI 676] wherein it was held that 'cancellation charges' collected in lieu of cancellation of booking of hotel room does not attract Service Tax in terms of Section 66E(e) of the Finance Act. (iv) In M/s. South Eastern Coalfields Ltd. v. CCE & ST, Raipur [supra]- The Tribunal held that the view take ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
