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Rule 6(3) of Service Tax Rules, 1994 - Deficiency in Services, Service Tax

Issue Id: - 113520
Dated: 22-3-2018
By:- ROHIT GOEL

Rule 6(3) of Service Tax Rules, 1994 - Deficiency in Services


  • Contents

One of my client had provided services to his client and due service tax had been paid by assessee within stipulated time period on accrual basis in 2012-2016. But in march 2017, some of the bills got settled by the customer (Govt.) of Client stating that there is deficiency in services provided and therefore payment will against this bill will be restricted to a particular amount. After receiving this information from customer, client has issued a credit note in respect of same and adjusted the excess amount paid in different years.

Department is of the opinion that though the amount in question is allowed u/r 6(3) but the same shall be treated as cenvat credit and the same shall be allowed as per Cenvat Credit Rules. They are invoking the provisions of CCR that the source document in this case will be Invoice and it should be only 12 months old if you are claiming cenvat credit rules.

whether the contention of the department is right in respect of Rule 6(3) of Service Tax Rules, 1994. Please share case law also if possible.

Thanking you in anticipation

Posts / Replies

Showing Replies 1 to 4 of 4 Records

Page: 1


1 Dated: 22-3-2018
By:- MARIAPPAN GOVINDARAJAN

In my view it could not be treated as CENVAT credit.


2 Dated: 23-3-2018
By:- KASTURI SETHI

Dear Querist,

Restriction of one year in respect of source document (invoice) is not applicable in the situation explained by you. It is not the intention of legislature. This is stretching the law.The Department's stand appears to be incorrect inasmuch as the very purpose of framing Rule 6(3) of Service Tax Rules, 1994 would be defeated. Rule 6(3) of Service Tax Rules, 1994 is not hit by Rule 4(1) of Cenvat Credit Rules, 2004.

Thus I support the views of Sh.Mariappan Govindarajan Sir.


3 Dated: 23-3-2018
By:- Rajagopalan Ranganathan

Sir,

The third proviso to rule 4 (1) of Cenvat Credit Rules, 2004 states that

" Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after one year of the date of issue of any of the documents specified in sub- rule (1) of rule 9.

Rule 9 (1) of the same rules states that -

"The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :-

(a) an invoice issued by-

(i) a manufacturer or a service provider for clearance of -

(I) inputs or capital goods from his factory or depot or from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer;

(II) inputs or capital goods as such;

(ii) an importer;

(iii) an importer from his depot or from the premises of the consignment agent of the said importer if the said depot or the premises, as the case may be, is registered in terms of the provisions of Central Excise Rules, 2002;

(iv) a first stage dealer or a second stage dealer, as the case may be, in terms of the provisions of Central Excise Rules, 2002; or

(b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rules, 2002 from his factory or depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by, or on behalf of, the said manufacturer or importer, in case additional amount of excise duties or additional duty leviable under section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty became recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short-levy by reason of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any provisions of the Excise Act, or of the Customs Act, 1962 (52 of 1962) or the rules made there under with intent to evade payment of duty.

Explanation.- For removal of doubts, it is clarified that supplementary invoice shall also include challan or any other similar document evidencing payment of additional amount of additional duty leviable under section 3 of the Customs Tariff Act; or

(bb) a supplementary invoice, bill or challan issued by a provider of output service, in terms of the provisions of Service Tax Rules, 1994 except where the additional amount of tax became recoverable from the provider of service on account of non-levy or non-payment or short-levy or short-payment by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Finance Act or of the rules made thereunder with the intent to evade payment of service tax.

(c) a bill of entry; or

(d) a certificate issued by an appraiser of customs in respect of goods imported through a Foreign Post Office; or, as the case may be, an Authorized Courier, registered with the Principal Commissioner of Customs or the Commissioner of Customs in-charge of the customs airport, or

(e) a challan evidencing payment of service tax, by the service recipient as the person liable to pay service tax; or

(ea) a challan evidencing payment of service tax by the manufacturer or the provider of output service being importer of goods as the person liable for paying service tax for the services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India; or

(f) an invoice, a bill or challan issued by a provider of input service on or after the 10th day of, September, 2004; or

(fa) a Service Tax Certificate for Transportation of goods by rail issued by the Indian Railways; or

(g) an invoice, bill or challan issued by an input service distributor under rule 4A of the Service Tax Rules, 1994.

Provided that the credit of additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be allowed if the invoice or the supplementary invoice, as the case may be, bears an indication to the effect that no credit of the said additional duty shall be admissible;

Credit note issued by the client is not mentioned as one of the documents on the basis of which cenvat credit can be taken. Therefore one year restriction is not applicable to credit note issued by your client. As suggested by the experts imoisition of such restriction will defeat the purpose of rule 6 (3) of Service tax Rules.


4 Dated: 23-3-2018
By:- KASTURI SETHI

Sh.Ranganathan Sir, Thanks for going deeper into the situation and throwing more light.


Page: 1

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