CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

NEW DELHI

PRINCIPAL BENCH

SERVICE TAX APPEAL NO. 52620 OF 2018

(Arising out of Order–in-Original No. 0 4 / C O M M R / S T / J B P dated 27.04.2018

passed by Commissioner, Central GST, Central Excise & Customs, Jabalpur)

Northern Coalfields Ltd.

…Appellant

Versus

Commissioner CGST, CE & Customs - Jabalpur …Respondent

APPEARANCE:

Shri Hemant Sindhwani, Chartered Accountant for the Appellant

Shri Harshvardhan, Authorized Representatives for the Department

CORAM:

HON’BLE MR.JUSTICE DILIP GUPTA, PRESIDENT

HON’BLE MR. P. V. SUBBA RAO, MEMBER (TECHNICAL)

Date of Hearing/Decision: January 13, 2023

FINAL ORDER No.: _50050/2023__

JUSTICE DILIP GUPTA

Northern Coalfields Limited¹ has filed this appeal to assail the

order dated 27.04.2018 passed by the Commissioner for recovery

of service tax with interest and penalty.

2. The appellant is a public sector undertaking and is a

subsidiary of Coal India Ltd. It is primarily engaged in the business

of extraction and selling of coal from open cast mines. The appellant

has ten production units located in the State of Madhya Pradesh as

well as in the State Uttar Pradesh. It, however, has separate

order/product wise service tax registrations for applicable payment

of service tax on reverse charge mechanism.

1. the appellant

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3. The appellant had recorded certain amount as income in the

Financial Statements on account of compensation with caption of

Penalty from Customer, Liquidated Damages and Penalty on

Supplier. Such amount were booked in four different Financial

Codes, and the nature of such bookings in the Financial Codes has

been described by the appellant in the following manner:-

(a)Penalty /Liquidated Damages on Supplier of goods - As

per the terms of Supply order, in case of delay in supplying the

ordered goods or there is quality deficiency in supplied items,

penalty at a specified percentage is charged on the concerned

vendor. For the sake of convenience of accounting, instead of

showing the net purchase cost, the agreed price of goods is

debited (shown as expense) and the penalty amount is credited

(shown as Income) separately.

(b)Penalty from Customers - This basically covers two types of

bookings:

(1) As per Fuel Supply Agreement (FSA) generally entered

with power house customers, there is a clause in the

agreement which stipulates liability of the seller (Appellant) or

the coal buyer in case of short delivery or lifting respectively,

as the case may be. If for a particular financial year, the level

of delivery by appellant company or the level of lifting by the

buyer falls below the specified percentage in that year, the

defaulting party shall be liable to pay compensation to the

other party for such shortfall in level of delivery or level of

lifting in the manner stated in the FSA.

(2) In respect of coal supplied by e-auction process, the

successful bidder will be required to deposit coal value for

supply in a month within a stipulated time period. In case the

same is not paid by the successful bidder, the deposit money is

forfeited by Appellant company. Further, in case the successful

bidder who does not lifts coal within the stipulated time period,

the deposit money is forfeited as compensation.

(c) Penalty Contractors & Others– If the contractor does not

execute the subject contract in terms of the work order issued

for any reason, compensation is charged and after deducting

the compensation net amount (i.e. contract amount less

penalty is paid to service provider). For the sake of

convenience of accounting, instead of charging / debiting

contract cost net of compensation, the entire value of work

order is generally debited / booked as expense

and

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ST/52620/2018

comp