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TMI BlogPenalty received by Port on account of failure to achieve Minimum Guarantee Tonnage is not consideration of service for levy of Service TaxX X X X Extracts X X X X X X X X Extracts X X X X ..... Penalty received by Port on account of failure to achieve Minimum Guarantee Tonnage is not consideration of service for levy of Service Tax - By: - Rachit Agarwal - Goods and Services Tax - GST - Dated:- 11-5-2022 - - CESTAT Hyderabad in M/S. KRISHNAPATNAM PORT COMPANY LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, GUNTUR [2022 (5) TMI 253 - CESTAT HYDERABAD] Issue In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volved Whether the liquidated damages/ compensation charges received by the Appellant towards the breach and non-compliance of Minimum Guarantee Tonnage Facts Service recipient agreed to import a specified quantity of coal in a specified period of time and the Appellant agreed to render port services for the same for a consideration. The said Agreement also provides for paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of penalty/liquidated damages/ compensation charges of Rs.100/MT by the services recipient in the event of failure to achieve the Minimum Guaranteed Tonnage Observations and Final Order That penalty clause is provided in the impugned Agreement dated 12.07.2011 to safeguard the commercial interest (1) to compensate the Appellant for financial damage/injury in case of failure t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o achieve the MGT and also (2) to discourage the service recipient from repeatedly breaching the terms and conditions of the Agreement 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 Parties entered into the said Agreement dated 12.07.2011 for import of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 The recovery of liquidated damages/penalty from the other party in the instant case cannot be said to be towards any service per se, as the Appellant did not carry on any activity to receive th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e compensation charges Any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable Amounts recovered as charges for breach or non-compliance of contractual terms and conditions cannot be construed as consideration for refraining or tolerating an act and were thus not leviable on Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice Tax - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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