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TMI Blog2023 (4) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... d damages for non-compliance of contract, cannot be considered as consideration for tolerating an act and hence, not leviable to service tax under section 66E (e) of the Finance Act. While the above Orders have been passed by the Tribunal in 2022, subsequently, CBIC has issued Circular No. 214/2023-Service Tax dt. 28.02.2023. In this Circular, the issue of leviability of Service Tax on Liquidated Damages has been considered in elaborate details - The Department has not disputed in the present case that the amount received by the Appellant is on account of Liquidated Damages only. Service Tax on reimbursement of expenses paid to foreign entity and equal amount of penalty under section 78 - HELD THAT:- The appellant has not been able ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of confirmed demand on account of service tax on Liquidated Damages, he produces Circular No. 214/1/2023-ST dt. 21.02.2023 wherein CBIC has considered the very same issue and discussed the decisions given by various co-ordinate benches of CESTAT. CBIC has given clarification that Service Tax is not leviable on Liquidated Damages received. He also relies on the case law of Krishnapatnam Port Company Ltd. vs CCE ST, wherein this Hon ble Tribunal has passed Final Order No. A/30056/2022 dt. 25.04.2022 on the very same issue even before the Circular was issued by the CBIC. He submits that relying on this case law of Krishnapatnam Port Company Ltd., this Hon ble Tribunal has passed one more order in the case of Bharat Dynamics Limited vide Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence is not coming forth in the present case. Therefore, he submits that the reimbursements made by them are liable to be added to the consideration to arrive at the Service Tax payable. Hence, the Department has correctly quantified the Service Tax payable on such reimbursements. He submits that in spite of clear provisions brought in the statute towards treatment of reimbursements, still the party continued to take the abatement for more than two years and only in account of Audit conducted, non-payment of Service Tax has come to their knowledge. Therefore, he submits that the extended period of limitation has been correctly invoked in this case. 6. Heard both sides. It is seen that identical issue had come up before this Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses 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 taken by the Principal Commissioner that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the Appellant towards consideration for tolerating an act leviable to Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied] 7. This Bench has passed another Final Order No. A/30130/2022 in the case of M/s Bharat Dynamics Ltd vs CCT, Hyderabad on this issue, wherein it was held as under: 7. Learned Counsel for the Appellant urges that the issue is no longer res integra and under similar facts and circumstances, this Tribunal in the case of Steel Authority of India Ltd, Salem vs Commissioner of GST Central Excise, 2021(7) TMI 1092, Chennai, held that no service tax is payable on the amount collected towards liquidated damages, following the ruling of the Tribunal in South Eastern Coalfields Ltd vs Commissioner of Central Excise Service Tax 2020 (12) TMI (912). In SECL, this Tribunal observed that such amounts collected by way of penalty/liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunals have been considered at Para 5 of this Circular and in Para 6 the conclusion has been given as under: 6. In view of above, it is clarified that the activities contemplated under section 66E(e), i.e. when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are the activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. Field formations are advised that while taxability in each case shall depend on facts of the case, the guidelines discussed above and jurisprudence that has evolved over time, may be followed in determining whether service tax on an activity or transaction needs to be levied treating it as service by w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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