TaxTMI 
TaxTMI 
2023 (12) TMI 904
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the order dated 28.12.2018 passed by the Additional Commissioner has been confirmed, except to the extent that the penalty imposed by the Additional Commissioner under section 77 of the Finance Act, 1994 [the Finance Act] has been set aside. 2. It transpires that during the period from July 2012 to June 2017, the appellant had collected the following amount :- (i) Forfeiture of Earnest Money Deposit/Security Deposit from the customers for breach of contract (short lifting or non lifting of the agreed quantity of goods) ; (ii) Liquidated Damages/penalties on goods for breach of contract (delayed delivery of goods) (iii) Liquidated Damages/penalty on contractors (service providers) for breach of the contract ter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ultant placed reliance on the decision of the Tribunal in South Eastern Coalfields versus Commissioner of Central Excise and Service Tax [2020 (12) TMI 912 - CESTAT NEW DELHI], and to other decisions which have followed this decision ; and (ii) The Circular dated 28.02.2023 issued by Central Board of Indirect Tax & Customs regarding leviability of service tax under section 66E (e) of the Finance Act also answers this issue in favour of the appellant. 6. Shri Manoj Kumar, learned authorized representative appearing for the department has, however, supported the impugned order. 7. The submissions advanced by the learned consultant for the appellant and the learned authorized representative appearing for the department have been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ract for an agreed consideration. It is not the intention of the appellant to impose any penalty upon the other party nor is it the intention of the other party to get penalized. 28. It also needs to be noted 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 cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for a contract'. (emphasis supplied) 10. The Circular dated 28.02.2023 issued by the Central Board of Indirect Tax and Customs also provides that service tax cannot be levied on the amount collected for the said purpose and it is reproduced below: "4. As can be seen, the said expression has three limbs: -i) Agreeing to the obligation to refrain from an act, ii) Agreeing to the obligation to tolerate an act or a situation, iii) Agreeing to the obligation to do an act. Service of agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act is nothing but a contractual agreement. A contract to do something or to abstain from doing something cannot be said to have taken place unless the....