Non lifting of agreed material

[S.C. WADHWA]

Dear Expert,

1.	A Company entered into a contract
	for manufacturing of 1000 kgs of a particular
	product with another company.
2.	It manufactured 1000kgs but the buyer could not
	purchase the entire quantity.
3.	The company raised debit note for compensation
	excluding taxes for material not purchased by it.
4.	The product is excisable. Amount of debit note is
	₹ 20 lacs.
	Query is:
1	Whether it is covered under declared service.
2	If yes, whether service tax would be levied or not.
3	The company is not registered as service provider
	Whether it has to get registration under service tax
	as service provider. Please give your expert opinion. Regards, WADHWA

AI Summary

Company Issues Debit Note for Unpurchased Goods; No Service Tax or Registration Needed Under Current Rules. A company manufactured 1000 kgs of a product under contract but the buyer did not purchase the full quantity. The company issued a debit note for 20 lacs as compensation for the unsold material. The query raised concerns whether this situation constitutes a declared service, if service tax applies, and if the company needs to register as a service provider. The response clarified that no excise duty is applicable since the final product was not cleared. The debit note is seen as a civil penalty, not a service, thus no service tax registration is required.