Forfeited Deposits Not Consideration for Services Under Finance Act; Tribunal Confirms No Service in Contract Cancellation.

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....The case deals with the issue of whether the amount retained through forfeiture of earnest money/security deposits of contractors can be considered as consideration for declared services u/s 66E(e) of the Finance Act, 1994, which covers "agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act." The Tribunal held that the forfeited amount cannot be considered as consideration towards rendering declared services u/s 66E(e). The cancellation of the contract itself is not considered a service. This decision is in line with earlier rulings of the Tribunal and the Supreme Court in the case of South Eastern Coalfields Limited. The Department's Circular No. 214/1/2023-ST dated 28th February 2023 clari.........