Service Tax credit on Penalty Charges., Service Tax

[RAJENDRA KHOMNE]

Sir,

When service provider i.e. contractor fails to comply with conditions of work order assigned to him, company raised debit note to him for penalty charges with service tax. Our query is Can contractor take service tax credit as per debit note? Pl explain with rule.

Thanks,

Posts / Replies

[KASTURI SETHI]

Agree with SH.MARIAPPAN GOVINDARAJAN, Sir. I would like to add that even Board's circulars have no statutory force. These also clarify and explain the concept.

[CS SANJAY MALHOTRA]

Very well said Mr. Kasturi ji and appreciate participation by members on the trailing issue. Circulars may be binding on departmental officers but not on Industry, for e.g. as none has even quoted Circulars in their Excise Returns/Excise Invoices.

Notifications or any act has to be seen judicially also so that the purpose of the act/notification should not be defeated, i.e. why Higher Appellate Authorities / Courts interpretation sometime make the law makers i.e. CBEC/CBDT to accept their findings and amend the law accordingly.

[RAM AVTAR]

Dear All,

As per my understanding this is penalty for non fulfillment of terms and condition of contractor. If this is part of contract like not timely completion of contract and penalty imposed. It would not change the nature of service. Service Will be work contract service and Cenvat is available. Yes if penalty paid for violation of any service tax act and penalty imposed then CENVAT of such penalty is not available.

In other way if any award granted to contractor for early completion of work, then service tax liability occurs on work contract head and CENVAT is also available