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TMI Blog2024 (1) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant Shri Sandeep Pandey, Authorised Representative for the Respondent ORDER This appeal is directed against order in original No 05/COMMISSIONER/ G B NAGR/2018-19 dated 19.03.2019 of the Commissioner Central Tax, GST Central Excise Gautam Budh Nagar. By the impugned order following has been held: ORDER (i) I order to demand and recover Service Tax of Rs 3,14,05,595/- (Rs Three Crore Fourteen Lakh Five Thousand Five Hundred and Ninety Five only), under Section 73 (2) of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017 from M/s Bharat Heavy Electricals Ltd. Plot No 7, Tower A, Advan6t IT Park, Floor 5, Sector 142, Noida. (ii) Interest as leviable on the above amount under Section 75 of the Finance Act, 1994 as amended read with Section 174 of the CGST Act, 2017 from M/s Bharat Heavy Electricals Ltd. Plot No 7, Tower A, Advan6t IT Park, Floor 5, Sector 142, Noida. (iii) I impose a penalty of Rs 3,14,05,595/- (Rs Three Crore Fourteen Lakh Five Thousand Five Hundred and Ninety Five only) upon M/s Bharat Heavy Electricals Ltd. Plot No 7, Tower A, Advan6t IT Park, Floor 5, Sector 142, Noida under Section 78 of the Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PSWR 8 Addl Commr, Delhi DLI/SVTax/001/ADC(NR)/ DE/10/2023-24 29.05.2023 Corporate Office, Delhi 9 Commr Chennai 03/2023 08.03.2023 Piping Centre Chennai 10 Jt Commr Hyderabad 10/2023-(ST) 31.07.2023 PSED Hyderabad Board has issue Circular No 214/1/2023_ST dated 28.02.2023 clarifying the issue in the favour of the appellant Since the issue has been already been settled in favour of the appellant the order in original should be set aside. 2.3 Learned authorized representative re-iterates the findings recorded in the impugned order. 3.1 We have considered the impugned order along with the submissions made in appeal and during the course of the arguments. 3.2 The appellants were issued show cause notice dated 10.04.2018, demanding service tax on liquidated damages for delay in supply contract and service charges as per the written agreement with their suppliers. The relevant paras from the show ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 1994. 9. In view of the above, Ms. BHEL appears to have contravened the provisions of Finance Act, 1994: (i) Section 66B of the Finance Act, 1994, as amended, read with Rule 4A of Service Tax Rules, 1994 by not charging the service tax on the value of services provided or to be provided, as discussed supra; (ii) Section 68 of Finance Act, 1994, as amended ,read with Rule 6 of Service Tax Rules, 1994 by not paying the service tax required to be paid by them on the taxable service provided within the prescribed period at the rates specified in Section 66B ibid; and (iii) Section 70 of Finance Act, 1994, as amended, read with Rule 7 of Service Tax Rules, 1994 for non-assessment of the taxable value of liquidated damages on which they are required to pay service tax, and failure to declare the value of services rendered in Returns. 10. Grounds for invocation of extended period of demand in terms of proviso to section 73 91) of the Finance Act, 1994 and for imposition of mandatory penalty:- It is observed that M/s. BHEL is registered with the Department for payment of filing returns on regular basis. Hence, they are fully conversant with Service Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they have rendered themselves liable for penalty under 78 of the Finance Act, 1994 11. Saving Clause: Even after the enactment of the Central Goods and Services Tax Act, 2017 (CGST ACT, 2017), with effect from 01.07.2017, the provisions of the Finance Act, 1994 pertaining to investigation, inquiry, assessment proceedings, adjudication etc. remain unaffected by virtue of Section 174 (2) of the Central Goods Services Tax Act 2017 which is reproduced below- Section 174 of the Central Goods Services Tax Act 2017 (a) ... 12. And whereas the service tax liability on the Liquidated damages have been worked out on the basis of data/information submitted by M/s. BHEL. Thus_the present notice relates exclusively to the issue of service tax liability of Ms. BHEL on Liguidated damages/Penalty, as per the details provided by them. 13. Therefore, M/s Bharat Heavy Electricals Ltd., Plot No. 7, Tower A, Advant IT Park, Floor-5, Sector- 142, Noida, Gautam Budha Nagar, Uttar Pradesh- 201301 are hereby required to show cause to the Commissioner of Central Goods Service Tax, Noida, within 30 days of receipt of this notice, as to why; (i ) an amount of Rs. 3,58,46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual price representing the price of goods/services is payable by the customer subject to the condition that the delivery of goods/services is effected by the dates specified in the contract failing which the contractual value representing the price of goods/services payable by the buyer stands reduced by a certain amount. This condition of the contract providing for deduction of contractual value is termed as Liquidated Damages Clause. 4. A show cause notice dated 17.04.2018 was issued to the respondent mentioning therein that the respondent was charging and collecting amount in the name of penalty/late delivery charges from the contractors/material supplier on account of delay in supply of goods, delay in execution of work but the respondent was not making payment of the service tax under section 66E (e) of the Finance Act on this amount. The respondent filed a reply denying the allegations made in the show cause notice but the Additional Commissioner, by the order dated 31.03.2019, confirmed the 3 the Finance Act demand of service tax. The respondent filed an appeal before the Commissioner (Appeals) which has been allowed by order dated 19.07.2019. 5. 6. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant 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 party to get penalized. 28. It also needs to be noted that Section 65B(44) defines service to mean any activity carried out by a person 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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