TaxTMI 
TaxTMI 
2025 (8) TMI 170
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.... upon him under Section 78 of the Finance Act, 1994 for suppression the facts and contravention of statutory provisions with intent to evade payment of Service Tax. However if the Service Tax so determined and interest is paid within a period of thirty days from the date of receipt of the Order in Original, the penalty payable shall be twenty five percent of said Service Tax amounting to Rs. 632989/- and reduced amount of penalty is also paid within the said period of 30 days." 2.1 The appellant is state level Co-operative organization owned by its member (Distt. Milk Unions). It works to promote the production, collection, processing, and sale of milk and milk products, to help improve the income and development of farmers and those involved in animal husbandry. They are having service tax registration for providing taxable services under the category of 'Business Support Service', 'Renting of Immovable Property Service' and 'Manpower Supply Service', and 'Security Service' and 'Legal Services'. 2.2 During audit of records of the appellant, it was observed that the appellants had shown income of Rs.74,38,283 under head of indirect income for the year 2015-16, and as per the ....
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.... CGST & Central Excise, Bhopal 2021 (46) GSTL 409 (Tri.-Del.) • South Eastern Coalfields Limited vs. Commr. Of Central Excise & Service Tax, Raipur 2021 (55) GSTL 549 (Tri.-Del.) • Amit Metaliks Limited vs. Commissioner of CGST, Bolpur 2020 (41) GSTL 325 (Tri.-Kolkata) 3.3 Learned Authorized Representative reiterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in the appeal and in the course of the arguments. 4.2 On merits of the issue, the impugned order observed as follows:- "5. I have carefully gone through the facts of the case and submissions made by the appellant in their appeal memorandums as well as during the course of personal hearing. The issue involved in the appeal is whether the appellant is liable to pay service tax on 'Earnest Money Forfeiture' amounts received during the period from February, 2015 to March, 2016. It has been alleged that the forfeited amount is a consideration for not executing the contractual obligation by the service provider either partly or fully therefore, the said amount forfeited is a consideration for tolerating the....
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....vy of service tax on these charges. In the case of Bharat Heavy Electricals Limited referred, relying on the earlier decisions following has been observed:- "6. Shri Z.U. Alvi, learned counsel appearing for the respondent has submitted that this issue as to whether the amount collected towards liquidated charges can be subjected to service tax under section 66E (e) of the Finance Act has been decided by a Division Bench of the Tribunal in M/s South Eastern Coal Fields Ltd. Vs. Commissioner of Central Excise And Service Tax, Raipur which was subsequently followed by the Tribunal in M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. Vs. Principal Commissioner, CGST And Central Excise, Bhopal. 7. Learned counsel for the respondent is justified in submitting that the issue stands covered by the Division Bench judgement of the Tribunal in M/s South Eastern Coal Fields Ltd. The Division Bench observed as follows: "25. It is in the light of what has been stated above that the provisions of Section 66E(e) have to be analyzed. Section 65B(44) defines service to mean any activity carried out by a person for another for consideration and includes a declared service. One of ....
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....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. 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 decla....
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....performance of that contract. 7.1.1 It is common for the parties entering into a contract, to specify in the contract itself, the compensation that would be payable in the event of the breach of the contract. Such compensation specified in a written contract for breach of non-performance of the contract or parties of the contract is referred to as liquidated damages. Black's Law Dictionary defines 'Liquidated Damages' as cash compensation agreed to by a signed, written contract for breach of contract, payable to the aggrieved party. 7.1.2 Section 74 of the Contract Act, 1972 provides that when a contract is broken, if a sum has been named or a penalty stipulated in the contract as the amount or penalty to be paid in case of breach, the aggrieved party shall be entitled to receive reasonable compensation not exceeding the amount so named or the penalty so stipulated. 7.1.3 It is argued that performance is the essence of a contract. Liquidated damages cannot be said to be a consideration received for tolerating the breach or non-performance of contract. They are rather payments for not tolerating the breach of contract. Payment of liquidated damages is stip....
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....n for tolerating the breach of contract but as a compensation for the losses suffered and as a penalty for discouraging the non-serious buyers or bidders. Such payments being merely flow of money are not a consideration for any supply and are not taxable. The key in such cases is to consider whether the impugned payments constitute consideration for another independent contract envisaging tolerating an act or situation or refraining from doing any act or situation or simply doing an act. If the answer is yes, then it constitutes a 'supply' within the meaning of the Act, otherwise it is not a "supply". 7.1.6 If a payment constitutes a consideration for a supply, then it is taxable irrespective of by what name it is called; it must be remembered that a "consideration" cannot be considered de hors an agreement/contract between two persons wherein one person does something for another and that other pays the first in return. If the payment is merely an event in the course of the performance of the agreement and it does not represent the 'object', as such, of the contract then it cannot be considered 'consideration'. For example, a contract may provide that payment by the recip....