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Service Tax credit on Penalty Charges.

Service Tax - Started By: - RAJENDRA KHOMNE - Dated:- 23-1-2016 Last Replied Date:- 1-2-2016 - 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, - Reply By Akash Deep - The Reply = Dear Sir,There is no service tax liability on amount of penalty. You have wrongly charged ser .....

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consideration. - Reply By CA PRASHANT DUTT - The Reply = If the amount of invoice is renegotiated due to deficient provision of service or due to terms of the contract (for example contingent on the happening or non-happening of a future event), the tax will be payable on the revised amount. This is subject to the excess amount either refunded or a suitable credit note issued to the service receiver. However, concession is not available for bad debts - Reply By CS SANJAY MALHOTRA - The Reply = F .....

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ng issue. - Reply By KASTURI SETHI - The Reply = Input service credit can be taken only on Service Tax paid on input service in terms of Rule 2 (l) and Rule 3 of the Cenvat Credit Rules, 2004 and Service Tax charged on penalty amount is in violation of 66 B read Section 67 of the Finance Act and in no way related to input service. I fully agree with views of Sh.Akash Deep, Sh.Mahir S. and Sh.CS Sanjay Malhotra. Nothing has been left untouched by them (Experts). No need to touch the issue of debi .....

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E(1)(e) would be applicable. It is now settled legal position. We endorse the very view of Mr. MARIAPPAN GOVINDARAJAN Sir. e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; Regards, YAGAY and SUN (Management, Business and Indirect Tax Consultants) - Reply By Ganeshan Kalyani - The Reply = I agree with Mariappan sir & Yagay and Sun views in this respect. - Reply By CS SANJAY MALHOTRA - The Reply = Dear Friends,To reiterate what has be .....

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consideration for the activity of breaking the law making such activity a service ?No. To be a service an activity has to be carried out for a consideration. Therefore fines and penalties which are legal consequences of a person s actions are not in the nature of consideration for an activity.Hence, above is important to conclude the aspect. - Reply By YAGAY AND SUN - The Reply = Dear All, On this matter, two aspects are important; viz, Education Guide of Service Tax is just for education purpos .....

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ular nor a manual of instructions issued by the Central Board of Excise and Customs. To that extent it does not command the required legal backing to be binding on either side in any manner. The guide is being released purely as a measure of facilitation so that all stakeholders obtain some preliminary understanding of the new issues for smooth transition to the new regime. In this matter, penalty would be treated at par with Liquidity Damage, it is not the result of legal consequences of a pers .....

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hese (divergent) yield error proof conclusions. An expert driver is who drives vehicle on a road which is bumpy or muddy or watery or slippery or full of potholes or crowded otherwise every driver can drive a vehicle on a smooth road. - Reply By KASTURI SETHI - The Reply = Sh.Mahir S., Yes pl. The issue of leviability of Service Tax on penalty charges has been dragged here which was subject of another query raised earlier. - Reply By CS SANJAY MALHOTRA - The Reply = Dear Mahir, Non availability .....

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uments on this earlier in and against Very interesting and knowledge enriching to have debate on levy of service tax on penalty issue. Above all it can never be concluded that all penalties are chargeable to tax, same goes case wise or else CBEC would have charged service tax even on penalty levied for late submission of return. Would the same be called declared service. Levy of Service tax is not applicable on all penalties, the same has been to seen from respective case wise. It is no way a de .....

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/st-circulars/st-circulars-2010/st-circ-121-2k10 Circular No. 96/2007 dated 23.08.07 - Reply By MARIAPPAN GOVINDARAJAN - The Reply = Now the department has issued show cause notices for service tax on surcharge (now it is late fee). - Reply By Mahir S - The Reply = Sanjay ji,Yes. I agree to your point regarding Debate on levy of service tax on the Penalty Issue ; for purpose of Knowledge sharing and enriching. - Reply By surya narayana - The Reply = With due respects to the views expressed by ou .....

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ar No. 121/3/2010-ST dated 26.4.2010 mentioned by Sh.CS Sanjay Malhotra clearly clears the air. Board's circulars are binding on the departmental officers and not on courts. It has been held by so many courts (including the Apex Court). Board will have to stick to its guns unless or until the relevant portion of Education Guide and Board's Circular are either amended or withdrawn. - Reply By KASTURI SETHI - The Reply = Sh.Surya Narayana Ji, Whether penal clause is covered in the definiti .....

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s. They are i. renting of immovable property; ii. construction of a complex, building, civil structure or a part thereof iii. temporary transfer or permitting the use or enjoyment of any intellectual property right; iv. Services in relation to information technology software; v. agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; vi. transfer of goods by without transfer of right to use such goods; vii. activities in relation to delivery of g .....

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rvice tax. Further, the phrase Declared services has been defined under Sec.65B(22) as any activity carried out by a person for another person for consideration and declared as such under Sec.66E . The above definition also supports my view that the subject act is a declared service and subject to service tax. Thanks & Best Regards, Suryanarayana - Reply By YAGAY AND SUN - The Reply = Thanks to 'Surya Sir', for endorsing our view on this matter. - Reply By vijay kumar - The Reply = D .....

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f such service tax, I don't think it would be an input service for him in terms of Rule 2(l) of the CCR, 2004. There was some deficiency of service on his part in providing a particular service to the company, for which he was penalized. Such an activity or deficiency cannot be an input service to provide an output service by him. Thanks & Regards. - Reply By MARIAPPAN GOVINDARAJAN - The Reply = The credit cannot be taken against service tax paid on penalty as correctly analyzed by Shri .....

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d of Excise and Customs. To that extent it does not command the required legal backing to be binding on either side in any manner. The guide was released purely as a measure of facilitation so that all stakeholders could obtain some preliminary understanding of the new issues for smooth transition to the new regime. Hence, Circulars such as the present one would prevail over the Education Guide, 2012. - Reply By Ganeshan Kalyani - The Reply = Healthy discussion and it actually enriches the queri .....

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