I. TRIBUNAL
1 Neyveli Lignite Corporation Ltd. vs. CCE&ST [2021-128 taxmann.com-405-CESTAT-Chen] Date of order: 26th July, 2021
Liquidated damages recovered from the contractor cannot be said to be a consideration for agreeing to tolerate the act of the contractor of not completing the task within time schedule so as to attract the provisions of section 66E(e) of the Finance Act, 1994
FACTS
The issue before the Tribunal relates to the demand of service tax on liquidated damages recovered by the appellant for acts of default such as delayed or deficient supplies by various suppliers. The period involved in all the appeals is after 1st July, 2012 and the case set out by the Department is that the appellant had agreed to tolerate breach of timelines stipulated in the contract against the amount imposed as liquidated damages as consideration u/s 66E(e) of the Finance Act, 1994.
HELD
The Tribunal relied upon the decisions in the cases of South Eastern Coalfields Ltd. vs. CCE&ST [2021] 124 taxmann.com 174 (New Delhi-CESTAT) and M.P. Poorva Kshetra Vidyut Vitaran Co. Ltd. vs. Pr. Commissioner CGST & CE [2021] 126 taxmann.com 182 (New Delhi – CESTAT) and held that it is not possible to sustain the view taken by the Commissioner that since the contractor did not complete the task within the time schedule, the appellant agreed to tolerate the same for a consideration in the form of liquidated damages, which would be subjected to service tax u/s 66E(e) of the Finance Act. The appeal was accordingly allowed.
Note: A similar view is also taken by the Chennai Tribunal in the case of Steel Authority of India Ltd. vs. CCE [2021] 128 taxmann.com 400 (Chennai-CESTAT), order dated 26th July, 2021.
2 M/s Seaport Lines India Pvt. Ltd. vs. CGST&CE [2021-TIOL-574-CESTAT-Mad] Date of order: 7th September, 2021
A freight forwarder, when acting as a principal, will not be liable to pay service tax when the destination of the goods is from a place in India to a place outside India when there is a mark-up between the freight received and freight paid
FACTS
During verification of records of the assessee, it was noticed that they hire containers from different liners like Maersk and Hapag Lloyd and ‘sell’ these to their customers; that while arranging containers for shippers, the assessee collected ocean freight and local charges like terminal handling charges and documentation charges; and they also availed CENVAT credit on such charges and paid service tax on the invoice amount raised on customers. It was noticed that the assessee collected ocean freight charges higher than the actual amounts charged by shipping lines / steamer agents; however, they did not include the ocean freight charges collected in taxable value for the purpose of payment of Service Tax under business support services.
HELD
The Tribunal, relying on the decision in the case of M/s Marinetrans India Pvt. Ltd. [2020] (33) GSTL 241 (Tri-Hyd) held that buying and selling space on ships does not amount to rendering a service and any profit or income earned through such transactions is not liable to service tax. The demand was accordingly set aside.
3 M/s. Bharat Coking Coal Ltd vs. CCE&ST [2021-TIOL-551-CESTAT-Kol] Date of order: 25th August, 2021
A joint reading of section 67 of the Finance Act and Rule 3 of the Service Tax (Determination of Value) Rules, 2006 clarifies that service tax is chargeable on the value of the service provided. Any other expenses incurred and reimbursed is not includible in the value for charge of service tax
FACTS
The appellant is a PSU and a 100% subsidiary company of Coal India Limited engaged in the business of mining and selling of coal. They receive security services under a Memorandum of Understanding from the Central Industrial Security Force (CISF) and were discharging service tax under reverse charge. For the purpose of valuation, the amount paid to CISF towards cost of deployment, cost of arms and ammunition and cost of clothing items (uniforms), etc., was considered. In addition to the above, they were also providing facilities to CISF for free residential accommodation, free medical services to the CISF personnel at its premises, free vehicles / cabs to CISF personnel and reimbursement of expenditure on petty imprest expenses, medicines and telephones on actual submission of bills / invoices. The appellant has not included the value of the above facilities for payment of service tax on reverse charge basis.
HELD
The Tribunal, relying on the case of Central Industrial Security Force 2019-TIOL-3277-CESTAT-All where it has been held that expenses incurred towards medical services, vehicles, expenditure on dog squad, stationery expenses, telephone charges, expenditure incurred by service recipient for accommodation provided to CISF, are not includible as the same cannot be considered as consideration for providing security services.
