Image Source: Jagran Josh
Bharat Heavy Electricals Ltd (BHEL) has won a big legal victory following the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi, passing a beneficial order in its current tax row. The ruling of the tribunal, which came on February 21, 2025, is a landmark moment for BHEL, giving strength to its legal position and opening up significant financial advantages to the engineering colossus.
Key Highlights
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CESTAT Delhi held in favor of BHEL on the disputed matter of service tax demand on liquidated damages and penalty amounts received by the company. The tribunal cited earlier landmark judgments, affirming that such receipts are not a taxable service under Section 66E(e) of the Finance Act, 1994.
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The bench recognized that the issue was already decided in favor of BHEL in previous cases, such as a comparable dispute before the Hyderabad Bench and a seminal judgment by the Principal Bench at New Delhi. The government has endorsed these precedents through formal circulars, further solidifying BHEL's position.
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This direction makes BHEL not liable for service tax on penalty and liquidated damages, which could lead to huge tax savings and refund entitlement for amounts already paid.
The ruling comes at a time of robust performance for BHEL, with the company having recently won a ₹115 crore arbitration award confirmed by the Delhi High Court and posting healthy growth in order inflows and profits.
Legal analysts point out that this CESTAT ruling has the potential to become a precedent for other public sector and private organizations with similar tax issues, marking a more taxpayer-friendly reading of service tax legislation.
With this authoritative legal victory, BHEL not only consolidates its financial health but also reiterates its image as a strong leader in India's power and engineering industry.
Sources: CaseMine, CNBC TV18, Indian Kanoon
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