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TMI Blog2024 (11) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract: When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. Section 73 74 of Chapter VI of Indian Contract Act provides for compensation of loss or damage caused by breach of contract. Section 75 of Contract Act talks about compensation for party rightfully rescinding the contract. Apparently there were executed the agreements to purchase land which are absolutely out of the scope of service tax. Cancellation of these agreements has been made as per mutual consent of buyer/appellant and the sellers of eight Agreements to Sell subject to compensation to be paid to buyer of such amount as specifically agreed between the parties. These facts when read in the light of above discussion are sufficient for us to hold that the amount of compensation received by the appellant is not an amount for any act of obligation or toleration on par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind any positive evidence to support the alleged suppressions of facts on part of the appellant. The Show Cause Notice is held to be barred by time. Accordingly, the order under challenge is hereby set aside and the appeal is hereby allowed. - DR. RACHNA GUPTA, MEMBER (JUDICIAL) AND MRS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) Mr. Krishna Mohan Menon Ms. Parul Sachdeva, Advocates for the appellant Mr. S.K. Ray, Authorized Representative for the Respondent ORDER The present appeal has been filed to assail the Order-in-Appeal No.88/2018 dated 28.09.2018. The facts in brief which have culminated into the said order are that the appellants are registered as provider/recipient of taxable service, namely, manpower supply service, works contract service etc. During the audit of the appellants record for the financial year 2012-13, 2013-14 2014-15 the Jurisdictional Range Officer observed that the appellant has received an amount of Rs.13,16,17,000/- as a claimed income from agreement cancellation. The breakup of the said amount received is as follows:- Financial Year 2012-13 Rs.4,26,00,000/- Financial Year 2013-14 Rs.7,00,17,000/- Financial Year 2014-15 Rs.1,90,00,000/-. Department forme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shetra Vidyut Vitaran Company Limited Vs Commissioner of CGST Central Excise [2022 TAXSCAN (CESTAT) 249] iii. M/s Bharat Dynamics Ltd Vs Commissioner of Central Tax, Hyderabad [F.No/A/30130/2022 dt 14.09.22 in ST/30964/2018] iv. Northern Coalfields Ltd Vs Commissioner of CGST, CE Cus., Jabalpur [2023 (71) G.S.T.L 63 (Tri-Del)] v. M/s M.N Dastur Company Private Limited Vs Commissioner of Service Tax- I, Kolkata [2023-TAXSCAN (CESTAT) 686] 4. With these submissions and impressing upon that there was no reason to invoke the extended period of limitation the SCN is alleged to have been barred by time and the order under challenge is prayed to be set aside. Appeal is prayed to be allowed. 5. While rebutting these submissions, ld. Authorised Representative has mentioned that the appellant has received the compensation for cancelling Land Sale Agreement, which itself determines that the act constitutes a taxable service under section 66 (E) ( e) of the Finance Act, 1994. It is submitted that the act of cancellation involves agreeing to an act or tolerating an act or a situation which is called as declared service and the same is taxable. With respect to the act of suppression of facts, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook into the definition of service. Section 65B(44) of the Finance Act defines service to mean any activity carried out by a person for another for consideration, and includes a declared service, but does not include what is mentioned in a, b and c . The relevant portion of the definition of service is reproduced below : Section 65B(44) service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include - (a) an activity which constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Declared services have been defined in Section 66E and sub-section (e) of Section 66E, which is involved in this appeal, is as follows : Declared services 66E. The fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of damage sustained by reason of the breach. 12. Compensation for failure to discharge obligation resembling those created by contract: When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. Section 73 74 of Chapter VI of Indian Contract Act provides for compensation of loss or damage caused by breach of contract. Section 75 of Contract Act talks about compensation for party rightfully rescinding the contract. 13. Apparently there were executed the agreements to purchase land which are absolutely out of the scope of service tax. Cancellation of these agreements has been made as per mutual consent of buyer/appellant and the sellers of eight Agreements to Sell subject to compensation to be paid to buyer of such amount as specifically agreed between the parties. These facts when read in the light of above discussion are sufficient for us to hold that the amount of compensation received by the appellant is not an amount for any act of obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 the other party complie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal, Chennai Bench has dealt with the identical facts of getting the damages on account of cancellation of the contracts in the case of M/s. Bharat Heavy Electricals Ltd. vs. Commissioner of GST and Central Excise in Service Tax Appeal No.41500 of 2019 decided on 26.04.2023. We find no reason to differ from these findings. More so, for the reason that since the value of taxable services for charging service tax is the gross amount charged for providing such taxable services has to be found Hence any other amount which calculated not for providing such taxable service cannot be the part of that value. We have already held that the act of entering into sale cancellation agreement is not an act of rendering taxable declared service. Any amount received as damages, in lieu thereof, cannot be called as the taxable value. We draw our support from the decision of Hon ble Apex Court in the case titled as Union of India vs. Intercontinental Consultants and Technocrats Pvt. Ltd. reported as 2018 (10) GSTL 401 (S.C.). 20. In the light of these observations since the appellant has not rendered any activity which can be called as taxable declared Service, no question arises of any alleged evas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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