Case Law Details
Chennai Metro Rail Ltd Vs Commissioner of GST & Central Excise (CESTAT Chennai)
CESTAT Chennai held that the amount of damages received for tolerating the breach of contract by contractors and sub-contractors is not consideration. Any amount, which is not a consideration for provision of service, cannot be subjected to service tax.
Facts- Chennai Metro Rail Ltd. (CMRL) is a joint venture between the Government of India and the Government of Tamil Nadu that builds and operates Chennai Metro, which is proposed to ba a rapid transport serving the city of Chennai.
Intelligence developed by the officers of Directorate Generate of GST Intelligence, Chennai Zonal Unit revealed that CMRL have not paid service tax on the consideration received by them for tolerating the non-performance of agreed obligations by their contractors. It appeared to the department that CMRL is liable to pay service tax of Rs.14,31,75,822/- and Rs.23,72,71,674/- on the taxable amounts received and retained by CMRL along with interest for not paying their service tax liability within the prescribed time and on account of various acts of omission and/or commission on their part have rendered themselves liable to penalty u/s. 76, 77 and 78 of the Finance Act, 1994.
A Show Cause Notice was issued to demand the service tax amount of Rs.14,31,75,822/- received through encashment of performance Guarantee / Bank Guarantee and Rs.23,72,71,674/- towards collected/ retained as liquidated damages during the period along with interest and for imposition of penalties under various sections of Finance Act, 1994.
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