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TMI Blog2024 (11) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Corporation Ltd. Respondent are engaged in the business of providing services under the category of banking and other financial services under the Finance Act, 1994 the Act by extending rupee term loan, short term loan, equipment lease financing and transitional financing etc. for various power purchase in generation, transmission and distribution sector. For rendering the services, the respondent has been charging interest and other fee income on such loans as per the terms of the loan agreement. The case of the department is that during audit, it was observed that he respondent was charging liquidated damages/ penal interest @ 2% over and above the applicable interest rate in the event of any default in payment of principal and interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.T.L. 549 (Tri.-Del.) 2. Northern Coalfileds Ltd. Vs. Commissioner of CGST, C.E. & Cus., Jabalpur 2023(71)G.S.T.L. 63 (Tri-Del.) 3. Western Coalfields Ltd. Vs. Commissioner of CGST & Central Excise, Mumbai 2022 (9) TMI 741-CESTAT Mumbai 4. Krishnapatnam Port Co. Ltd. Vs. Commr. Of C.Ex. & S.T., Guntur 2023(72)G.S.T.L. 259 (Tri-Hyd) 5. M/s Bajaj Finance Ltd. Vs. Commissioner of Central Excise & GST, Pune-I 2022 (8) TMI 473-CESTAT Mumbai 6. Religare Securities Ltd. Vs. Commissioner of Service Tax, Delhi 2014 (36) S.T.R. 937 (Tri.-Del.) 7. Commissioner of Service Tax, Chennai Vs. Repco Home Finance Ltd. 2020 (42)G.S.T.L. 104 (Tri.-LB) 8. Commissioner, Central Excise & Service Tax, Large Taxpayer Unit Delhi vs. M/s Power F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the decisions of the Tribunal in favour of the appellant. The decision in Religare Securities Ltd. (supra), also followed the principle laid down in LSE Securities Ltd. and on that basis concluded that DPC is not a commission/brokerage for sale/purchase of securities and hence there is no justification for inclusion of the same in the value of the services. To quote from the said decision: "that such DPC collection has got nothing to do with the sale/purchase of the securities, a service which the appellant is rendering as a stock broker, but admittedly is a charge recovered from only those customers, who delayed the payments of the securities value and is in fact is a penal interest, for compensating the assesee for the payments alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable service and is not a consideration for the service provided does not become part of the value which is taxable. It should also be remembered that there is marked distinction between "conditions to a contract" and "considerations for the contract". A service recipient may be required to fulfil certain conditions contained in the contract but that would not necessarily mean that this value would form part of the value of taxable services that are provided. 25. It is in the light of what has been stated above that the provisions of Section 66E(e) have to be analyzed. Section 65B(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 service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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. Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions, it is imputably clear that the liquidated damages/penal interest charged by the appellant @2% cannot be construed as additional consideration but is a penal interest on account of delayed payment of loans on which no service tax can be levied. The nature of delayed payment charges as well as of the liquidated damage/ penalty interest is the same as both are being charged in the event of delay being made by the clients of the appellants and are, therefore, penal in nature. 10. We, accordingly, hold that the liquidated damages/penal interest charged by the appellant are not exigible to service tax as per the provisions of the Act for the simple reason that such charges are not relatable to taxable service being rendered by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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