https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=767583 https://www.taxtmi.com/caselaws?id=767583 Taxability - declared service - amounts received in the nature of Liquidated damages, forfeiture of security deposits, fines/penalties/Earnest Money deposit, etc. as compensation for the losses incurred on account of delay on part of the contractors/vendors in completion of the work project etc., amounts to toleration of an act or not - HELD THAT:- In the case of South Eastern Coalfields [ 2020 (12) TMI 912 - CESTAT NEW DELHI ], the Principal Bench of this Tribunal after considering the provision of Section 65B(44) defining service , Section 66E(e) enumerating the declared services and the provisions of Section 67 dealing with the valuation of taxable service for charging service tax and referring to the decision of the Hon ble Apex Court in the case of Commissioner of Service Tax Vs. M/s. Bhayana Builders [ 2018 (2) TMI 1325 - SUPREME COURT ] and Union of India Vs. Intercontinental Consultants and Technocrats [ 2018 (3) TMI 357 - SUPREME COURT ] and the TRU Circular dated 20.06.2012, held as t is, therefore, not possible to sustain the view taken by the Principal Commissioner that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards consideration for tolerating an act leviable to service tax under section 66E(e) of the Finance Act. There is no reason to differ with the settled principles of law as enunciated by the decision in the case of South Eastern Coalfields Ltd. The amount recovered by the appellant towards penalty is not a consideration for any activity which has been undertaken by the appellant and as a result there is no service in terms of Section 65B(44) of the Act. The facts of the present case do not suggest that there is any other independent agreement to refrain or tolerate, or to do an act between the parties hence the issue is decided in favour of the appellant. The other issues related to invocation of extended period of limitation, penalty and interest are not required to be gone into as the issue on merits stands decided in favour of the appellant. The learned Counsel for the appellant has also submitted that in certain transactions, the amounts received in the nature of liquidated damages/forfeited amounts from the contractors located outside India, i.e., in Canada, Hong Kong, Singapore, etc there cannot be any service tax liability on the alleged service of tolerating the act of delay in the hands of the appellant - Since the issue is held in favour of the appellant on merits, it is not necessary to go into the said argument raised by the learned Counsel. The amount received from the recipients located abroad is hereby set aside. Conclusion - The amounts collected as penalties and liquidated damages do not constitute consideration for any service under the Finance Act, 1994. The impugned order deserves to be set aside. The appeal is, accordingly allowed. Case-Laws Service Tax Tue, 18 Mar 2025 00:00:00 +0530