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TMI Blog2022 (5) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020 (12) TMI 912 - CESTAT NEW DELHI] . Various commercial contacts had been executed by South Eastern Coalfields and certain clause provided for levy of penalty for non-observance / breach of the terms of the contract. A show cause notice was issued with an allegation that the amount charged by the Appellant during the period from July 2012 to March 2016 appeared to be taxable as a declared services under Section 66E(e) of the Finance Act. The Principal Commissioner, however, did not accept the contention advanced on behalf of the Appellant and confirmed the demand of service tax holding that the amount received by the said appellant towards penalty, earnest money deposit forfeiture and liquidated damages would tantamount to a considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an act under Section 66E of the Finance Act, 1994. 2. The period involved in the appeal is after 01.07.2012 and the case set out by the Department is that the Appellant had agreed to tolerate breach of timelines stipulated in the contract, the amount imposed for delay in delivery terms as per Price Reduction Schedule (PRS) are consideration for the act of tolerating contractual default; and that the appellant had rendered declared service of agreeing to the obligation to refrain from an act, or to tolerate an act or a situation or to do an act contemplated under section 66E(e) of the Finance Act, 1994. 3. Shri Deepro Sen, Learned counsel appearing for the Appellant made the following submissions: a. A similar issue concerning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mands have been confirmed in accordance with the provisions of section 66E(e) of the Finance Act. 5. Heard both sides through video conferencing and perused the appeal paper book. 6. There is substance in the submission advanced by the learned counsel for the Appellant that no service tax is payable on the amount collected towards delay in delivery as this issue has been decided by the Tribunal in favour of the Appellant in South Eastern Coalfields. Various commercial contacts had been executed by South Eastern Coalfields and certain clause provided for levy of penalty for nonobservance / breach of the terms of the contract. A show cause notice was issued with an allegation that the amount charged by the Appellant during the period fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 imposed only if there is noncompliance. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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