https://www.taxtmi.com/caselaws?id=444067 Liquidated damages or delay charges recovered for breach of contract are not taxable as a declared service under section 66E(e) of the Finance Act, 1994 unless the agreement specifically provides for refraining from an act, tolerating an act or situation, or doing an act in return for consideration. Where the contractual clause is compensatory and intended to secure performance, it does not create a separate bargain for tolerating default. Read as a whole, the contract shows consideration for supply or services, while the penal clause protects the recipient's commercial interest. On this reasoning, service tax on such liquidated damages is not sustainable. en-us Tue, 03 Oct 2023 00:00:00 +0530 Sat, 07 Oct 2023 13:47:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=444067 Liquidated damages or delay charges recovered for breach of contract are not taxable as a declared service under section 66E(e) of the Finance Act, 1994 unless the agreement specifically provides for refraining from an act, tolerating an act or situation, or doing an act in return for consideration. Where the contractual clause is compensatory and intended to secure performance, it does not create a separate bargain for tolerating default. Read as a whole, the contract shows consideration for supply or services, while the penal clause protects the recipient's commercial interest. On this reasoning, service tax on such liquidated damages is not sustainable. Case-Laws Service Tax Tue, 03 Oct 2023 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=444067