𝗖𝗘𝗦𝗧𝗔𝗧 𝗖𝗵𝗲𝗻𝗻𝗮𝗶 𝗥𝘂𝗹𝗶𝗻𝗴 𝗼𝗻 𝗟𝗶𝗾𝘂𝗶𝗱𝗮𝘁𝗲𝗱 𝗗𝗮𝗺𝗮𝗴𝗲𝘀 𝗮𝗻𝗱 𝗕𝗮𝗻𝗸 𝗚𝘂𝗮𝗿𝗮𝗻𝘁𝗲𝗲 𝗘𝗻𝗰𝗮𝘀𝗵𝗺𝗲𝗻𝘁 📢 The Tribunal held: "Encashment of performance/bank guarantees and amounts retained as liquidated damages are not a consideration for the provision of any service and thus are not subject to service tax."

🔍 𝗙𝗮𝗰𝘁𝘀: 𝗖𝗼𝗺𝗽𝗮𝗻𝘆: Chennai Metro Rail Ltd. (CMRL) 𝗜𝘀𝘀𝘂𝗲: Are liquidated damages and bank guarantee encashments subject to service tax? 𝗔𝗰𝘁𝗶𝘃𝗶𝘁𝘆: CMRL encashed bank guarantees and retained amounts as liquidated damages due to contractor non-performance.

⚖️ 𝗝𝘂𝗱𝗴𝗲𝗺𝗲𝗻𝘁: The Tribunal ruled that damages collected for non-performance are not taxable as they are not consideration for tolerating an act, per CBIC Circular No. 214/1/2023-ST. With no contractual basis to imply payment for tolerating breaches, all service tax demands, interest, and penalties were set aside.

𝗖𝗮𝘀𝗲 𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻: 𝗧𝗶𝘁𝗹𝗲: Chennai Metro Rail Ltd. vs. Commissioner of GST & Central Excise 𝗦𝗲𝗿𝘃𝗶𝗰𝗲 𝗧𝗮𝘅 𝗔𝗽𝗽𝗲𝗮𝗹 𝗡𝗼. 40046 of 2020 𝗢𝗿𝗱𝗲𝗿 𝗗𝗮𝘁𝗲: 12 September 2023 📜 This ruling reinforces that liquidated damages and similar compensatory payments do not constitute taxable services.