Principal Commissioner Vs Bharat Heavy Electricals Limited (BHEL) (CESTAT Delhi)
The CESTAT Delhi considered an appeal filed by the Principal Commissioner challenging the order of the Commissioner (Appeals), which had set aside the order of the Additional Commissioner confirming service tax, interest and penalty for the period from 1 July 2012 to 31 March 2017. The dispute concerned whether penalty or late delivery charges collected by the respondent under contractual liquidated damages clauses were liable to service tax under Section 66E(e) of the Finance Act, 1994.
The respondent, a Central Government Public Sector Undertaking engaged in the manufacture of plant and machinery, entered into contracts for the supply of goods and services. Under these contracts, the agreed contractual price was payable subject to timely delivery. Where delivery of goods or services was delayed, the contractual value payable by the buyer stood reduced in accordance with the liquidated damages clause. The Department issued a show cause notice alleging that the respondent collected amounts described as penalty or late delivery charges from contractors and material suppliers for delay in supply of goods or execution of work but had not discharged service tax under Section 66E(e). The adjudicating authority confirmed the demand, but the Commissioner (Appeals) allowed the respondent’s appeal.
