https://www.taxtmi.com/highlights?id=100794 Liquidated damages and penalty clauses for delayed contractual performance are compensatory consequences of breach, not consideration for a consensual service of tolerating an act under the declared service provisions. Taxability requires a bilateral arrangement under which one party agrees, for consideration, to refrain from an act, tolerate a situation, or do an act; here, the contract merely imposed a financial consequence for default and did not create an independent agreement to tolerate delay. The Tribunal therefore treated recovery of liquidated damages from suppliers for delayed delivery as non-taxable and upheld the order setting aside the service tax demand. en-us Tue, 16 Jun 2026 08:32:35 +0530 Tue, 16 Jun 2026 08:32:39 +0530 TaxTMI RSS Generator https://www.taxtmi.com/highlights?id=100794 Liquidated damages and penalty clauses for delayed contractual performance are compensatory consequences of breach, not consideration for a consensual service of tolerating an act under the declared service provisions. Taxability requires a bilateral arrangement under which one party agrees, for consideration, to refrain from an act, tolerate a situation, or do an act; here, the contract merely imposed a financial consequence for default and did not create an independent agreement to tolerate delay. The Tribunal therefore treated recovery of liquidated damages from suppliers for delayed delivery as non-taxable and upheld the order setting aside the service tax demand. Highlights Service Tax Tue, 16 Jun 2026 08:32:35 +0530 https://www.taxtmi.com/highlights?id=100794