https://www.taxtmi.com/caselaws?id=402113 The CESTAT New Delhi ruled in favor of the appellant regarding service tax liability on compensation/penalty amounts collected from coal buyers, contractors, and suppliers for breach of contract terms during July 2012 to March 2016. The Revenue contended these collections constituted a declared service under section 66E(e) of the Finance Act, arguing the appellant agreed to tolerate non-performance for consideration. The Tribunal distinguished between contract conditions and considerations, holding that penal clauses are safeguards for commercial interests, not the primary reason for contract execution. The agreements were intended for coal supply and services, not for imposing penalties. The Tribunal emphasized that section 66E(e) requires specific agreement to refrain from or tolerate acts with consideration flowing for such activity. Since penalty amounts lacked nexus with taxable services and weren't consideration for services provided, they fell outside section 67's taxable value scope. The appeal was allowed. en-us Tue, 22 Dec 2020 00:00:00 +0530 Thu, 14 May 2026 15:58:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=402113 The CESTAT New Delhi ruled in favor of the appellant regarding service tax liability on compensation/penalty amounts collected from coal buyers, contractors, and suppliers for breach of contract terms during July 2012 to March 2016. The Revenue contended these collections constituted a declared service under section 66E(e) of the Finance Act, arguing the appellant agreed to tolerate non-performance for consideration. The Tribunal distinguished between contract conditions and considerations, holding that penal clauses are safeguards for commercial interests, not the primary reason for contract execution. The agreements were intended for coal supply and services, not for imposing penalties. The Tribunal emphasized that section 66E(e) requires specific agreement to refrain from or tolerate acts with consideration flowing for such activity. Since penalty amounts lacked nexus with taxable services and weren't consideration for services provided, they fell outside section 67's taxable value scope. The appeal was allowed. Case-Laws Service Tax Tue, 22 Dec 2020 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=402113