TaxTMI 
TaxTMI 
2026 (9) TMI 10
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.... retention amounts from its vendors, advance payments from its customers etc. to unclaimed/unpaid balance in its Books of Account. It appeared that these amounts were a consideration received by the appellant for tolerating an act and the assessee had to pay service tax on the amounts so received but payment had not been made. In view of the above, department observed that Rs.1,46,91,645/- was the income for the assessee on which it had not paid the Service Tax of Rs.20,40,513/- in contravention of Section 66E(e) of the Finance Act, 1994. The said amount of service tax was proposed to be recovered from the appellant vide Show Cause Notice No. 19/2016-17 dated 10.02.2020 along with interest, at applicable rates under Section 75 of the erstwhile Finance Act, 1994 read with Section 174 of the CGST Act, 2017. Penalty was also proposed to be imposed upon them under Section 78 of the erstwhile Finance Act, 1994, read with Section 174 of the CGST Act, 2017. The said proposals were initially confirmed vide Order-in-Original 05/2021-22 dated 30.06.2021. The appeal against the same has been dismissed by the Commissioner (Appeals) vide Order-in-Appeal No. 54/2023 dated 06.03.2023. Being aggri....
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....e covered under Section 66E(e) of the Finance Act, there must necessarily be an independent agreement to refrain or tolerate, or to do an act between the parties. Further, penal implications under contract do not constitute such an agreement as Section 66E(e) contemplates performance of something and not breach of something. Reliance in this regard is placed on the following decisions/judgements wherein the issue regarding the taxability of such penal amounts recovered from the service providers on account of delayed/unsatisfactory work has been examined and it is held that no service tax is leviable on such charges: (i) South Eastern Coalfields Ltd. Vs. Commissioner of Central Excise and Service Tax reported as 2021 (55) GSTL 549 (Tri.-Del.), as maintained by the Hon'ble Supreme Court vide Order dated 11.07.2023 passed in the case of Commissioner of Central Excise and Service Tax Vs. South Eastern Coalfields Ltd., Civil Appeal No. 2372/2021 (ii) Hindustan Zinc Limited Vs. Commissioner of CGST & Central Excise, Udaipur, Final Order No. 50474/2025 dated 08.04.2025. 3.3 Reference is also made to CBIC's Circular No.214/1/2023-ST dated 28.02.2023 and Circular No. 1....
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....s failed to present them to the bank for encashment within a period of three months. Merely because some 'income' was recorded by the appellant in its financial records as per the relevant accounting practices, service tax cannot be levied without first establishing that the same was towards rendering of any taxable service by the appellant. 5.3 CBIC's Circular No. 178/10/2022-GST dated 03.08.2022 clarifies about declared service under the CGST Act. The meaning of "Agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act" in para 5(e) of Schedule II of CGST Act is strikingly similar to the definition of contract in the Contract Act, 1872. The Contract Act defines 'Contract' as a set of promises, forming consideration for each other. 'Promise' has been defined as willingness of the 'promisor' to do or to abstain from doing anything. 'Consideration' has been defined in the Contract Act as what the 'promisee' does or abstains from doing for the promises made to him. 5.4 A perusal of the entry at serial 5(e) of Schedule II would reveal that it comprises the aforementioned three different sets of activities viz. (a) the obligation to ....
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....d were thus not leviable on Service Tax in terms of Section 66E(e) of the Finance Act, 1994. Reliance in this regard is placed on the following decisions : (i) M/s. K.N. Food Industries Pvt. Ltd. v. Commissioner of CGST & Central Excise, Kanpur [2019-VIL-731-CESTAT-ALH-ST] wherein it was held that if a contract provides for an eventuality which is uncertain and also remedy if that eventuality occurs, such charges made towards making good the damages, losses or injuries arising from unintended events cannot be considered to be the payments for any services under Section 66E(e) of Finance Act, 1994. (ii) M/s. Monnet Ispat& Energy Ltd. v. CCE & ST, Raipur [2018 (9) TMI 1514] - while deciding whether Service Tax liability arises on the UI Charges received by the Company in terms of Section 66E(e) of the Finance Act, 1994, the Court held that UI Charges have been received by the Appellant only in those cases where the buyer has drawn more electricity than what was scheduled for him and does not amount to consideration for declared service. (iii) 7 ST/51462 /2019 M/s. Lemon Tree Hotels v. Commissioner, GST, Central Excise & Customs - 2020 (34) G.S.T.L. 220 (Tri....