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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 ..... ommissioner, CGST & CX, Dibrugarh by which the demand of service tax of Rs. 7,90,08,905/- has been confirmed by the Ld. Adjudicating authority along with equivalent interest and penalty under section 75 and 78 of the Finance Act, 1994 on the ground of toleration 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 refrai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is rebuttable presumption of their bonafide act. 4. Shri K.Chowdhury, Authorized Representatives appearing for the Department has, 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. 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 exec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes a declared service. One of the declared 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson for another for consideration. Explanation (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 term ..... X X X X Extracts X X X X X X X X Extracts X X X X
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