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TMI Blog2024 (3) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant is recovering liquidated damages for delay in execution of supply contract and service contract as per the agreement between the appellant and their customers. It is alleged that as per the Section 66E(e) of the Finance Act, 1994, the services rendered by the appellant is a taxable service, accordingly, Service Tax amounting to Rs.75,75,961/- for the period of July 2012 to June 2017 was demanded. On adjudication, the same was confirmed with interest and penalties. Aggrieved by the said order, they have filed an appeal before the Commissioner (Appeals), who in turn rejected their appeal. Hence, the present appeal. 3. At the outset, the learned advocate for the appellant submits that the basic allegation in the show-cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cludes 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 ST/COD/50047/2023 In DD/53463/2022 (ii) consideration for agreeing to tolera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the circular emphasized that there has to be an express or implied agreement to do or abstain from doing something against payment of consideration for a taxable supply to exist and such an act or a situation cannot be imagined or presumed to exist merely because there is a flow of money from one party to another. While discussing in detail the scope of ambit of the definition of 'service' under section 65B(44) and definition of 'declared service' under sub-section (e) of Section 66(E) of the Act has been discussed to decide the issue in favour of the assessee. Finally, we observe that while relying upon the decision of South Eastern Coalfields Ltd., the Hon'ble Bench in the case of Northern Coalfields Ltd. (supra) has held as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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