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TMI Blog2024 (6) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Commissioner of Central GST and Central Excise, Thiruvananthapuram. 2. Briefly stated the facts of the case are that the respondent is a Public Sector Undertaking engaged in the business of generation of electricity and allied activities. The Rajiv Gandhi Combined Cycle Power Project is a power generating plant owned by the respondent. The respondent has entered into a Power Purchase Agreement with M/s. Kerala State Electricity Board (KSEB) on 6.1.1995 in respect of above power plant at Kayamkulam. As per the conditions of the said Agreement, the respondent used to collect 'Monthly Capacity Charges' or fixed charges and 'Energy Charges Liquid' from M/s. KSEB. It is alleged that during the period 1.7.2012 to 31.3.2017, the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be obtained from M/s. KSEB and an alternate buyer has to pay proportionate share of the fixed cost. Further, he has submitted that even though transmission or distribution of electricity is a non-taxable service falling under the 'Negative List'; however, in the present case, the service provided by the respondent to M/s. KSEB are not in the nature of generation / transmission / distribution of electricity, instead the fixed charges recovered by the respondent from M/s. KSEB, is a compensation or consideration, for such an element of tolerance which is liable to Service Tax as the same would qualify as "Declared Service" in terms of Section 66E(e) of the Finance Act, 1994. 4. The learned Senior Advocate for the appellant has su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in the case of Gujarat State Petronet Ltd. vs. Commissioner of Central GST & CE: 2022-TIOL-735-CST-AHM wherein it is held that the clarification in GST Circular is applicable to issues pertaining to Service Tax regime. 5. Heard both sides and perused the records. 6. The short issue involved in the present appeal is whether the fixed charges collected by the respondent from M/s. KSEB on sale of electricity be considered as compensation / consideration, that is, for agreeing for the obligation to refrain from an Act as envisaged under Section 66E(e) of the Finance Act, 1994. 7. We find that the learned Commissioner after analyzing the Power Purchase Agreement entered in the year 1995 between the respondent and M/s. KSEB held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Levy of Service Tax on declared services in "Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" under Section 66E(e) of Finance Act, 1994 - Clarification C.B.I. & C. Circular No. 214/1/2023-S.T., dated 28-2-2023 F. No. CBIC-110267/14/2023-CX-VIII SECTION-CBEC Government of India Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes & Customs, New Delhi Subject : Leviability of Service Tax on the declared service "Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" under clause (e) of section 66E of the Finance Act, 1994 - Regarding. An issue has arisen on the levy of service tax on liquidated damages ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greeing to the obligation to refrain from an act, (ii) Agreeing to the obligation to tolerate an act or a situation, (iii) Agreeing to the obligation to do an act. Service of agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act is nothing but a contractual agreement. A contract to do something or to abstain from doing something cannot be said to have taken place unless there are two parties, one of which expressly or impliedly agrees to do or abstain from doing something and the other agrees to pay consideration to the first party for doing or abstaining from such an act. Such contractual arrangement must be an independent arrangement in its own right. There must be a necessary and sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether service tax on an activity or transaction needs to be levied treating it as service by way of agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act. Contents of Circular No. 178/10/2022-GST, dated 3rd August, 2022, may also be referred to in this regard. 7. Difficulty experienced, if any, in implementing the circular should be brought to the notice of the Board. Hindi version will follow." 7.2 The Ahmedabad Bench of the Tribunal in the case of Gujarat State Petronet Ltd. (supra) analyzing the issue in the context of applicability of Service Tax on liquidated damages referred to the said Circular No.178/10/2022 GST dated 03.08.2022 in examining the Service Tax liability under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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