Western Coalfields Ltd Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
Summary: The Customs, Excise and Service Tax Appellate Tribunal, Mumbai, West Zonal Bench considered an appeal by Western Coalfields Ltd against an order determining service tax liability of ₹12,64,55,319 on total recoveries of ₹93,93,07,361 made between July 2012 and March 2016. The demand was raised under Section 73 of the Finance Act, 1994 on the premise that such recoveries represented consideration for a “declared service” under Section 66E(e). Interest under Section 75 and penalties under Sections 77 and 78 were also imposed.
At the core of the dispute was the Department’s allegation that contractual obligations enforced by the appellant against buyers, contractors and material suppliers amounted to “agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act” covered by Section 66E(e). The amounts sought to be taxed comprised forfeiture of earnest money deposits tendered by bidders, forfeiture of security deposits, penalties for short-lifting by buyers, demurrage and penalties from contractors engaged for overburden removal, transportation and maintenance services, and liquidated damages recovered from suppliers under contractual arrangements.
The appellant relied upon the Tribunal’s decision in South Eastern Coalfields Ltd. v. Commissioner of Central Excise and Service Tax, 2021 (55) GSTL 549 (Tri.-Del.), contending that the identical issue had already been decided in favour of the assessee. In that decision, the Tribunal had held that penalty amounts, forfeiture of earnest money deposits and liquidated damages were not received as consideration for tolerating an act and therefore could not be subjected to service tax under Section 66E(e).
