Service Tax Not Payable on liquidated damages collected from supplier on account of non-performance of the contracts: CESTAT

The CESTAT ruled that service tax is not payable on liquidated damages collected from suppliers due to non-performance of contracts. The case involved a dispute regarding whether liquidated damages should be subject to service tax under the Finance Act. The Tribunal's ruling clarifies that such damages are not considered a taxable service, as they are a compensation for breach of contract rather than a fee for services rendered. The decision brings clarity to the treatment of liquidated damages under service tax law, helping businesses avoid unnecessary tax liabilities.