Order date – 22 September 2022

Facts –

• The Assesse, M/s. GKN Driveline India Limited, filed an appeal against the Order-in-Appeal dated 06.04.2022 passed by the Commissioner of G.S.T. and Central Excise (Appeals-II), Chennai.
• The issue involved in the present case is regarding the demand of service tax on liquidated damages.
• The appellant submitted that the issue is no more res integra as the same is decided in the case of M/s. Neyveli Lignite Corporation Ltd. v. Commissioner of Customs, Central Excise & Service Tax & Anr., Cestat Chennai.

Issues –

• Whether the Revenue was justified in demanding Service Tax on liquidated damages under Section 66E(e) of the Finance Act, 1994?

Order –

• Relying on the case M/s. South Eastern Coalfields Ltd. v. Commissioner of Central Excise & Service Tax, Raipur, The Tribunal held that 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.
• Therefore, the order of demand doesn’t sustain and the impugned order is set aside.
• Hence, the appeal is allowed with consequential benefits.