TaxTMI 
TaxTMI 
2023 (9) TMI 650
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...., which is proposed to be a rapid transport system serving the city of Chennai, Tamil Nadu. CMRL were centrally registered with the erstwhile Service Tax Commissionerate, Chennai. Intelligence developed by the officers of Directorate Generate of GST Intelligence, Chennai Zonal Unit revealed that CMRL have not paid service tax on the consideration received by them for tolerating the non-performance of agreed obligations by their contractors. It appeared that the Performance Guarantee executed in the form of Bank Guarantee was encashed by CMRL for violation of agreed obligations and that it is a consideration received by CMRL from the contractors for tolerating the financial loss due to non-performance of the contractors. Besides that, CMRL have retained / collected consideration as liquidated damages for non-performance and failure to comply with the agreed obligation by various contractors / sub-contractors. It appeared to the department that CMRL is liable to pay service tax of Rs.14,31,75,822/- and Rs.23,72,71,674/- on the taxable amounts received and retained by CMRL along with interest for not paying their service tax liability within the prescribed time and on account of vario....
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....nt of performance / Bank Guarantee which is a consideration for an act of agreeing to an obligation to tolerate all the acts and situations under section 66E(e) of the Act. We take up both the appeals against the impugned order for disposal together. 4. We have heard Shri P. Ravindran, learned counsel for the Chennai Metro Rail Ltd. and Shri Rudra Pratap Singh, learned Additional Commissioner (AR) for the Revenue. 4.1 Shri P. Ravindran, learned counsel submitted that the Appellant M/s Chennai Metro Rail Ltd, (hereinafter referred to as CMRL) is a joint venture between the Government of India and the State Government of Tamil Nadu with equal partnership. It builds and operates Chennai Metro, the elevated & underground rail network in the city of Chennai towards fulfilling its mission of meeting the modern transportation needs of the citizens of Chennai. CMRL engages various companies as contractors to execute specified works for CMRL given the high cost of the project involved and in public interest. The contracts entered into between CMRL, and the contracting entities require clear and strict clauses on performance and provision for compensation and even termination in the event ....
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....ntral Board of Indirect tax & Customs (CBIC) has issued Circular 178/10/2022-GST dated 3-8-2022 & Circular No. 214/1/2023-Service Tax dated 28-02-2023 (covering service tax & GST) accepting non-taxability of damages recovered on account of breach of contract. Further the ratio of a catena of case laws was in favour of the Appellant, as listed: a) Neyveli Lignite Corporation Ltd. Vs. Commissioner, Chennai -2021 (53) G.S.T.L. 401 (Tri. - Chennai) b) Northern Coalfield Ltd. Vs. Commissioner, Jabalpur - 2023 (71) G.S.T.L. 63 (Tri. - Del.) c) South Eastern Coalfields Ltd. Vs. Commissioner, Raipur - 2021 (55) G.S.T.L. 549 (Tri. - Del.) d) Commissioner of Service Tax Vs. Repco Home Finance Ltd. - 2020 (42) G.S.T.L. 104 (Tri. - LB) e) Northern Coalfields Ltd. Vs. Commissioner, Jabalpur - 2023 (71) G.S.T.L. 63 (Tri. - Del.) f) Paradip Port Trust Vs. Commissioner - 2022 (62) G.S.T.L. 186 (Tri. - Kolkata) g) Krishnapatnam Port Co. Ltd. Vs Commissioner of GST, Guntur -2023 (72) G.S.T.L. 259 (Tri. - Hyd.) h) Steel Authority of India Ltd. Vs Commissioner of GST, Salem - 2021 (55) G.S.T.L. 34 (Tri. - Chennai) He stated that the cumulative effect of the CBIC Circular dated 03.08.2....
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....ct entered into by the appellant with the contractors/ sub-contractors is not aimed at any activity to receive compensation by a breach of contract, similarly it cannot be said that it was the intention of the contractors to breach or violate the contract and incur a loss. Hence there is no agreement/ contract between the parties involving a consideration to be received for a service provided by the appellant which will attract service tax. We find that the issue is no longer res intigra and has been clarified by the CBIC itself as per the Circulars cited by the appellant. The relevant portion of Circular No. 214/1/2023-Service Tax dated 28-02-2023 is reproduced below. "2. It may be seen that "Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" is a Declared Service as per clause (e) of section 66E of the Finance Act, 1994. A service conceived in an agreement where one person agrees to an obligation to refrain from an act or to tolerate an act or to do an act, would be a 'declared service' under section 66E(e) read with section 65B(44) and would be leviable to service tax. 3. . . . . 4. As can be seen, the said exp....