Pankaj Ispat Ltd Vs Commissioner of Central Excise (CESTAT Delhi)
Forfeited amount for Order Cancellation was not consideration for any service, and therefore not subject to service tax: CESTAT Delhi
In the case of Pankaj Ispat Ltd. vs. Commissioner of Central Excise, the CESTAT Delhi addressed whether the amount forfeited due to the cancellation of an order could be considered taxable as a service under Section 66E(e) of the Finance Act, 1994. The appellant, registered for providing taxable services such as Transport of Goods by Road, had forfeited amounts from a buyer who breached a contract. The Department argued that the forfeited amount was a consideration for “Declared Services” and issued a show cause notice for recovery of service tax along with penalties. However, the Tribunal observed that Section 66E(e) applies only when there is an agreement to tolerate an act, refrain from an act, or perform an act, none of which occurred in this case. The Tribunal, referencing several precedents and circulars, concluded that the forfeited amount was not consideration for any service, and therefore not subject to service tax. The order against the appellant was set aside, and the appeal was allowed.
FULL TEXT OF THE CESTAT DELHI ORDER
