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Service tax impact on credit note issued against penalty amount hold by customer, Service Tax

Issue Id: - 111459
Dated: 4-2-2017
By:- Rakesh Mittal
Service tax impact on credit note issued against penalty amount hold by customer

  • Contents

Dear Colleagues,

I have query related to service tax . A service provider has raised an invoice for providing services and also giving an assurance for maintaining the quality of material. He raised an invoice for services say ₹ 2 cr + service tax. Now service recipient has raised a claim of ₹ 10 lac for quality deterioration. Now please suggest us whether service tax is applicable on ₹ 10 lac credit note on not ? If yes is there any case law ?

Regards

Rakesh Mittal

09643356753

Posts / Replies

Showing Replies 1 to 8 of 8 Records

1 Dated: 4-2-2017
By:- KASTURI SETHI

Dear Sir,

In my view invoice is also a contract or agreement. This is covered under Section 66 E(e). It is taxable.Pl. go through comprehensive reply posted on this forum by M/s.YAGAY AND SUN against Issue ID no.107261 dated 2.9.14.

There is one case law which pertains to Central Excise but it throws light on the issue as analogy is almost same.


2 Dated: 4-2-2017
By:- YAGAY AND SUN

Respected Kasturi Sir,

You have nicely recalled this order.smiley


3 Dated: 4-2-2017
By:- Rakesh Mittal

Respected Kasturi Sahaab / YAGAY AND SUN Ji

Thanks for your kind reply on this issue.

Request for some more clarification in this regard.

1. Are Service provider eligible to take reversal of service tax (on penalty credit note) in his book and may claim from dept ?

2. If Yes then service recipient would not be eligible to take CENVAT benefit on that amount.

3. If there is an service tax impact- whether Service recipient shall deduct this amount from original payment value or shall claim separately from service provider through separate payment entry?

Regrds

Rakesh Mittal


4 Dated: 4-2-2017
By:- YAGAY AND SUN

CENVAT credit on such transactions may not be allowed.


5 Dated: 5-2-2017
By:- KASTURI SETHI

Sh.Mittal Ji,

I agree with the views of M/s.YAGAY AND SUN.

How will you prove that it is input service in relation to taxable output service ? It is near impossible.

Regarding second query, in my view better option is that amount should be deducted from original payment.


6 Dated: 5-2-2017
By:- YAGAY AND SUN

yes, We are amenable with you Kasturi Sir.


7 Dated: 6-2-2017
By:- Rakesh Mittal

Respected Kasturi Sahaab / YAGAY AND SUN Ji

Thanks for your kind response on point no. 2 & 3.

Request for your valuable input/comment on point no. 1 as well i.e Can service provider take reversal of service tax (on penalty credit note) in his book against original service tax liability and may claim from dept ?. Because in this case we are the service provider.

Regards

Rakesh Mittal


8 Dated: 15-2-2017
By:- Ganeshan Kalyani

Credit is eligible on input service if it has nexus with the output service.


1

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