TaxTMI 
TaxTMI 
2025 (5) TMI 1826
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....cted appeal of the appellant. 2. Briefly stated facts of the present case are that the appellant M/s HSF Foods Pro Tech Pvt Ltd are engaged in manufacturing and clearance of Rice Processing Machinery falling under Tariff Heading 84193100 of Central Excise Tariff Act, 1985. During the course of audit, the audit team noticed that the appellant had received income by way of forfeiting advances received from the buyers during the financial years 2013-14, 2015-16 and 2016-17. The department was of the opinion that the amounts received are towards the taxable service under the category "tolerating an Act or situation". A show cause notice dated 11.05.2018, proposing to recover the service tax amounting to Rs.17,60,597/- alongwith interest and ....
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..... 5. Heard both sides and perused the records of the case. 6. We find that the issue involved in the present case is no longer res integra having been decided by the Tribunal in the case of South Eastern Coal Fields Ltd (supra), wherein the Tribunal has held as under: "24. What follows from the aforesaid decisions of the Supreme Court in Bhayana Builders and Intercontinental Consultants, and the decision of the Larger Bench of the Tribunal in Bhayana Builders is that "consideration" must flow from the service recipient to the service provider and should accrue to the benefit of the service provider and that the amount charged has necessarily to be a consideration for the taxable service provided under the Finance Act. Any amo....
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.... (iii) consideration to do an act. 26. Thus, a service conceived in an agreement where one person, for a consideration, agrees to an obligation to refrain from an act, would be a 'declared service' under Section 66E(e) read with Section 65B(44) and would be taxable under Section 68 at the rate specified in Section 66B. Likewise, there can be services conceived in agreements in relation to the other two activities referred to in Section 66E(e). 27. It is trite that an agreement has to be read as a whole so as to gather the intention of the parties. The intention of the appellant and the parties was for supply of coal; for supply of goods; and for availing various types of services. The consideration contemplated unde....
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....other party complies with the terms of the contract and a penalty is imposed only if there is non-compliance. ............ ........... 40. It is in this context and in the context of Section 74 of the Contract Act, that the Supreme Court observed : "20. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of parties pre-determined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract for predetermining damag....
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.... (supra), Krishnapatanam Port Co Ltd (supra), Madhya Pradesh Power Transmission Co Ltd (supra) and Western Coalfields Ltd (supra). 8. We also find that the CBIC vide Circular No. 214/1/2023-ST dated 28.02.2023 has accepted the decisions of the Tribunal in the cases of South Eastern Coal Fields Ltd (supra) and Western Coalfields Ltd (supra). The CBIC has clarified as follows: "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 ....