TaxTMI 
TaxTMI 
2026 (4) TMI 1510
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....ed that during the period April, 2015 to June, 2017, they have received consideration of Rs.3,21,367/- on account of deduction for bundling error, rejection and non-compliance, etc. It was observed that the activities performed by the appellant fall within the ambit of 'declared service' under Section 66E(e) of the Finance Act, 1994. It was also noticed that the appellant had not discharged the service tax liability on the amount received and hence, they are liable to pay service tax of Rs.46,598/-. Show cause notice August 8, 2019 was issued demanding duty along with interest and penalty under Section 77 and 78 of the Act. 2. Learned Counsel for the appellant has brought to our notice that it is in the case of M/s. The Power Transmissio....
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....specify the : (i) consideration for agreeing to the obligation to refrain from an act; or (ii) consideration for agreeing to tolerate an act or a situation; or (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 ....
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....o 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. 29. The situation would have been different if the party purchasing coal had an option to purchase coal from 'A' or from 'B' and if in such a situation 'A' and 'B' enter into an agreement that 'A' would not supply coal to the appellant provided 'B' paid some amount to it, then in such a case, it can be said that the activity may result in a deemed service contemplated under Section 66E(e). ....
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....eld to be in the nature of penal charges on account of breach or non-performance of contract and are recovered with the intention to make good for the losses and to also act as a deterrent to ensure that buyer or supplier do not violate the terms of the contract. These amounts cannot be termed as 'consideration' in lieu of any service under Section 65B (44) of the Act. Further, it has been laid down that an activity to be covered as a declared service under Section 66E(e) of the Act, there must necessarily be an independent agreement to refrain or tolerate or to do an act between the parties." 5. Coming to the facts of the present case, the activities of bundling error, rejection and non-compliance are not in the nature of any ac....