Service Tax

[Asked by Guest]

Whether a manufacturer who is manufacturing the excisable products and is paying duty is also laible to pay service tax incase it appoints the maintenance and handling contractor for selling its goods on its retail outlets.

[DR.MARIAPPAN GOVINDARAJAN]

What is your query?

[Mahir S]

From what i understood from your query, manufacturer is not liable for service tax for maintenance and handling contractor.

However, if such contractor is raising invoices with service tax and such service tax payment is made by the manufacturer, then the manufacturer can avail input service credit after making such service tax payment.

Sir,

our specific query is that we had obtained the handling and maintenance contract for managing all the affairs of IOC Petrol Pump and had spent for all the expenses of the Petrol Pump including the payment to the staff etc. The IOCL is the manufacture of Diesel + Petrol and is paying the Excise duty etc. The corporation had not given us the amount of service tax and had not deposited the amount of service tax. After the expiry of contract on 15.04.2008. The department had issued us the notice for depositing the service tax on full payment including the amount of reimbursement made by IOCL and had issued the adjucated order for depositing the service tax, interest and penalty. The query is that whether we are liable for payment of service tax or the corporation was liable to deposit the amount of service tax since it was entitled getting the claim adjusted in payment of excise duty incase it would had deposited this amount of service tax.

AI Summary

Service tax liability on handling and maintenance services: provider liable and reimbursements affect taxable consideration and input credit.
Issue whether service tax applies to handling and maintenance services at a manufacturer-run retail outlet when a contractor incurs expenses and is reimbursed by the principal. The provider of the taxable service is primarily liable to pay service tax; reimbursements can form part of consideration depending on contractual treatment. If the recipient pays service tax, it may claim input service credit subject to statutory conditions. The departmental demand against the contractor for tax on full payments including reimbursements highlights assessment, interest and penalty risks and the need for clear invoicing and credit compliance.