No Service Tax on amount recovered as Liquidated Damages

Rajcomp Info Service Limited Vs Commissioner (CESTAT Delhi)

In this case Liquidated damages, has been held to be susceptible to service tax under section 66E(e) of the Finance Act by the Commissioner as an amount received for tolerating an act. According to the appellant, the liquidated damages recovered on account of breach or non-performance of a contract is not a consideration in lieu of any service. It is infact, in the nature of a deterrent so that such a breach is not repeated.

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