https://www.taxtmi.com/caselaws?id=789361 Recoveries from employees for non-completion of notice periods and from dealers or distributors for failure to meet sales targets are characterised as compensatory or penal, not as consideration for a taxable or declared service. The toleration of an act clause applies only where the contract specifically provides for an agreement to tolerate the relevant conduct and the payment is made for that tolerance. On that reasoning, notice pay recoveries and target shortfall recoveries fall outside service tax, and the demand on both categories of receipts is not sustainable. en-us Tue, 03 Feb 2026 00:00:00 +0530 Wed, 08 Apr 2026 08:56:52 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=789361 Recoveries from employees for non-completion of notice periods and from dealers or distributors for failure to meet sales targets are characterised as compensatory or penal, not as consideration for a taxable or declared service. The toleration of an act clause applies only where the contract specifically provides for an agreement to tolerate the relevant conduct and the payment is made for that tolerance. On that reasoning, notice pay recoveries and target shortfall recoveries fall outside service tax, and the demand on both categories of receipts is not sustainable. Case-Laws Service Tax Tue, 03 Feb 2026 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=789361