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TMI Blog2023 (12) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... ternative submission made by the learned counsel for the appellant that in any view of the matter, the relinquishment charges recovered by the appellant are part of the electricity transmission service and, therefore, would be covered under the Negative List under section 66D (k) of the Finance Act. The order dated 04.03.2021 passed by the Principal Commissioner cannot be sustained and is set aside - Appeal allowed. - HON'BLE SHRI JUSTICE DILIP GUPTA, PRESIDENT And HON'BLE SHRI P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri B.L. Narasimhan, Advocate, Ms. Poorvi Asati, Advocate For the Appellant Shri Manoj Kumar, Authorized Representative (DR) For the Department ORDER JUSTICE DILIP GUPTA This appeal filed by M/s Central Transmission Utility of India Limited (formerly Power Grid Corporation of India Limited) the appellant has sought the quashing of the order dated 04.03.2021 passed by the Principal Commissioner of Central Goods and Service Tax, Delhi South Commissionerate The Principal Commissioner by which the demand proposed in the show cause notice has been confirmed after invoking the extended period of limitation contemplated under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er-State Transmission and related matters) Regulations, 2009, and (ii) Central Electricity Regulatory Commission(Sharing of Inter-State Transmission Charges and Losses) Regulations, 2010. 8. Thus, a power generating company has to enter into an agreement with the appellant to gain access to the ISTS network for the purpose of injection of power to the said network. Further, an exit option is provided to these companies to relinquish the access granted to it on payment of relinquishment charges. The relinquishment charges are paid in terms of a share of the transmission charges. 9. Investigations were initiated by the officers of the Directorate General of Central Goods and Service Tax Intelligence in February/March 2018 and though the appellant furnished a reply and submitted that relinquishment charges recovered by the appellant are part of electricity transmission charges which are covered under the Negative List and, therefore, the appellant would not be required to pay the service tax, a show cause notice dated 06.09.2018 was issued to the appellant proposing demand of service tax for the period from June 2014 to January 2017 for the reason that the appellant was under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges recoverable by the appellant are part of the Electricity Transmission Service and as exempted under the Negative List and, therefore, no service tax could have been demanded. 14. Shri Manoj Kumar, learned authorized representative appearing for the department has, however, supported the impugned order and has submitted that it does not call for any interference in this appeal. 15. The submissions advanced by learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 16. The main issue that arises for consideration in this appeal is whether the demand of service tax on the relinquishment charges under section 66E (e) of the Finance Act on the ground that the said charges are in the nature of consideration received towards rendition of the declared service i.e. tolerating of relinquishing access rights is justified. 17. The contention of the appellant is that the relinquishment charges collected by the appellant are not towards the provision of any service, but are in the nature of compensation on account of pre-mature termination of access by the existing power generating companies from the ISTS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee for breach of terms and conditions of the contract, and (iii) liquidated damages from the suppliers of material for breach of terms and conditions of the contract. The Tribunal held that the recovery of liquidated damages/penalty cannot be said to be towards any service per-se. 21. The relevant portion of the decision of the Tribunal is in Northern Coalfields Ltd. versus Commissioner CGST, CE Customs Jabalpur 2023 (71) G.S.T.L. 63 (Tri. Del.) is reproduced below :- 19. The issue in the present case is covered by the aforesaid decision rendered by the Tribunal and, therefore, it has to be held that service tax could not have been demanded from the appellant. 20. In this connection it would also be pertinent to refer to the Circular dated 3-8-2022 issued by the Department of Revenue regarding applicability of goods and service tax on liquidated damages, compensation and penalty arising out of breach of contract in the context of agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act . This Circular emphasizes that there has to be an express or implied agreement to do or abstain from doing something against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch activity of tolerating an act, such payments will not constitute consideration and hence such activities will not constitute supply within the meaning of the Act. (Emphasis supplied) 22. In South-Eastern Coalfields Ltd., the Tribunal held as follows :- 27. It is trite that an agreement has to be read as a whole so as to gather the intention of the parties. The intention of the appellant and the parties was for supply of coal; for supply of goods; and for availing various types of services. The consideration contemplated under the agreements was for such supply of coal, materials or for availing various types of services. The intention of the parties certainly was not for flouting the terms of the agreement so that the penal clauses get attracted. The penal clauses are in the nature of providing a safeguard to the commercial interest of the appellant and it cannot, by any stretch of imagination, be said that recovering any sum by invoking the penalty clauses is the reason behind the execution of the contract for an agreed consideration. It is not the intention of the appellant to impose any penalty upon the other party nor is it the intention of the other part ..... 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