Liquidated Damages Not Taxable as Declared Service: CESTAT sets aside Service Tax Demand, Extended Limitation Unsustainable

The CESTAT has ruled that "liquidated damages" are "not taxable as a declared service" and has set aside a "service tax demand" on that basis. The tribunal's decision, which is a significant victory for the taxpayer, was made on the grounds that the company's claim was not supported by evidence. The ruling clarifies that a tax authority can't add a tax to a company's account without a valid reason.