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Liquidated damages and contractual penalties were treated as...
Contractual compensation and tax liability: Tribunal rejected service tax on damages, dead rent and employee accommodation, confirming only conceded interest.
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Liquidated damages and contractual penalties were treated as compensation for breach of contract, not consideration for a service or tolerating an act, so the service tax demand was set aside. Dead rent demand was also rejected because the payments arose under earlier agreements and the Tribunal followed its prior ruling on the point. For residential accommodation provided to employees at site, the Tribunal held the department could not take a contrary stand after dropping the same demand for an earlier period without appeal. Where the service provider had already discharged the tax and the appellant reimbursed it, no further reverse charge liability survived. Only the conceded interest for delayed payment was confirmed, and no penalty was imposed.
Liquidated damages and contractual penalties were treated as compensation for breach of contract, not consideration for a service or tolerating an act, so the service tax demand was set aside. Dead rent demand was also rejected because the payments arose under earlier agreements and the Tribunal followed its prior ruling on the point. For residential accommodation provided to employees at site, the Tribunal held the department could not take a contrary stand after dropping the same demand for an earlier period without appeal. Where the service provider had already discharged the tax and the appellant reimbursed it, no further reverse charge liability survived. Only the conceded interest for delayed payment was confirmed, and no penalty was imposed.
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