TMI Blog2024 (5) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... iability of payment of Service Tax/GST on liquidation damages charged by the company. We find that identical issue in the appellant s own case has been decided by various Benches of Tribunal and which has consistently held that liquidated damages collected by the appellant as penalty/late delivery charges cannot be subjected to service tax u/s 66E (e) of the Finance Act. In this regard, we may refer the Final Order [ 2023 (4) TMI 54 - CESTAT NEW DELHI ] passed by the Principal Bench in the appellant s own case where identical issue was involved. Thus, we are of the considered view that the impugned order is not sustainable in law, therefore, we set aside the impugned order by allowing the appeal of the appellant with consequential relief, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 01.07.2012 amounts received for toleration of such acts attracted service tax under Clause(e) of Section 66E of the Act read with Section 65B(44), 65B(51), 65B(37), 65B(22) and 66B ibid. That the appellants had recovered liquidated damages/penalty while making payments to suppliers/service contractors. That the damage amounts recovered were recognized and charged for the period of delay between the due date of supply of goods/services as per the contractual terms and conditions against the actual date of supply of goods/services. 3. The department on the basis of inquiry entertained the view that the appellants are liable to pay service tax on liquidated damages as per section 66E (e) of the Act. On these allegations, a show cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He also placed on record the decisions referred by various Benches which are stated here in below: Bharat Heavy Electricals Ltd Vs. Commissioner of Central Tax, Medchal-GST vide Final Order No. A/30131-30132/2022 dated 14.09.2022. Dy. GM (Finance) Vs. Commissioner of Customs, vide Final Order No. 50879/2022 dated 20.09.2022. The Principal Commissioner, CGST, Central Excise Service Tax, Bhopal, (M.P.) Vs. Bharat Heavy Electricals Limited (BHEL) vide Final Order No. 50905/2022 dated 20.09.2022. Bharat Heavy Electricals Ltd. Vs. Commissioner of CGST, vide Final Order No. 50329/2023 dated 16.02.2023. 6. Ld. Chartered Accountant further submitted that the Department of Revenue has recently issued Circular No. 178/10/2022-GST dated 3rd August 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Tribunal in South Eastern Coalfields and they are as follows: 25. It is in the light of what has been stated above that the provisions of section 66E(e) have to be analyzed. Section 658(44) defines service to mean any activity carried out by a person for another for consideration and includes 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of it being consideration for providing deemed service. 9. We also observe that even the decision as relied upon by the department passed after the Circular dated 03.08.2022, it has been held that though 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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