TaxTMI 
TaxTMI 
2023 (2) TMI 606
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....implementation of various Information and Technology projects of the State Government. The process for undertaking a project was as follows: The State e-governance mission team accords administrative and financial approval to a Information and Technology project. Thereafter, Memorandum of Understanding is entered between the Appellant and the Department of Information Technology and Communication (hereinafter referred to as Department of IT & C), Government of Rajasthan. The memorandum specifies the role of the appellant, of being responsible for the complete implementation of the project. Advance amount is released to the appellant for such implementation, and any interest earned on the advance amount is utilised as part of the project. Then, the appellant issues the Notice for Tender/Request for Proposal for selecting an implementing agency. On selection, the appellant enters into a contract with the vendor for implementation of the project. The vendor raises invoices which includes VAT and Service tax, which is paid by the Appellant through payment sanction orders. The appellant raises invoices, including service charges, to the Government of Rajasthan. Upon completion of the....
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....d that the Supreme Court vide order dated 12. 12. 2022 has admitted the appeal of the Central Board of Indirect Taxes and Customs, though no stay had been granted. He prayed for setting aside the appeal. In the interest of fairness, the learned Authorised Representative highlighted the Tribunal's decision in Northern Coalfield Vs Commissioner [2023 (1) TMI 934-CESTAT New Delhi] wherein reliance was placed on this Tribunal's decision in South Eastern Coalfield Vs Commissioner of C. Ex & Service Tax, Raipur [2021 (55) GSTL 549 (Tri-Del) decided on 22.12.2020] which had decided identical issue in favour of the Appellant. Attention was also drawn to the CBIC Circular no. 178/10/2022- GST dated 03.08.2022 regarding the applicability of goods and service tax on liquidated damages, compensation and penalty arising out of breach of contract in the context of 'agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act'. 6. We have heard the learned Counsel for the appellant and the learned Authorised Representative. 7. The two main issues being agitated by the Appellant are the following: (i) Demand of service tax on the gross amou....
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....ceived the project cost for the activity of execution of the project. The services rendered by the appellant were limited to the supervision and monitoring of the execution of the projects, in lieu of which it recovered service charges and service tax has been paid by the appellant on the consideration received for the service. In respect to the amount paid to the vendors towards the project cost, the appellant has not provided any service and, therefore, no service tax can be levied for the reason that in terms of section 67 of the Finance Act, the amount paid to the vendors has not been received by the appellant 'for such service'. 24. The contention of the Department is that the amount paid by the appellant to its vendors is in the nature of expenses incurred by the appellant in the course of providing service to the State Government and such expenses would be includable in the taxable value of the services in terms of rule 5 of the Valuation Rules. 25. In the first instance, as noticed above, rule 5(1) of the Valuation Rules has been struck down by the Supreme Court as being ultra vires section 67 of the Finance Act. 26. Secondly, the appellant had ap....
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....d that section 65B(44) defines "service" to mean any activity carried out by a person for another for consideration. Explanation (a) to section 67 provides that "consideration" includes any amount that is payable for the taxable services provided or to be provided. The recovery of liquidated damages/penalty from other party cannot be said to be towards any service per se, since neither the appellant is carrying on any activity to receive compensation nor can there be any intention of the other party to breach or violate the contract and suffer a loss. The purpose of imposing compensation or penalty is to ensure that the defaulting act is not undertaken or repeated and the same cannot be said to be towards toleration of the defaulting party. The expectation of the appellant is that the other party complies with the terms of the contract and a penalty is imposed only if there is non-compliance. 29. The situation would have been different if the party purchasing coal had an option to purchase coal from 'A' or from 'B' and if in such a situation 'A' and 'B' enter into an agreement that 'A' would not supply coal to the appellant provided 'B' paid some amount to it, then in such....