Service Tax under reverse charge

[Vinay Sharma]

Dear Sir,

A partnership firm received bills from manpower supplier indicating 75% service tax liability of the service recipient. The partnership firm deposited this tax and availed service tax input credit for the same.

Later on the error came to notice that partnership firm was not liable to pay service tax under reverse charge. In fact service provider was liable to pay service tax.

Please answer the following questions.

1- Can department challenge input tax credit taken by partnership firm.If yes, how to defend.

2- If Department issues notice to service provider, he obtains a certificate from service receiver to the effect that service tax has been paid under reverse charge by the service recipient.Will it be regarded as valid discharge of his liability.

Kindly explain with case laws if any.

AI Summary

Partnership Firm Erroneously Paid Service Tax Under Reverse Charge, Advised to Seek Refund and Clarify Liability Issues. A partnership firm mistakenly paid service tax under the reverse charge mechanism, believing it was liable, when in fact, the service provider was responsible. The firm sought advice on whether the tax credit it claimed could be challenged and if a certificate from the service recipient could discharge the provider's liability. Experts clarified that the reverse charge mechanism depends on specific conditions and that the firm should seek a refund for the wrongly paid tax. They emphasized that liability cannot be transferred by agreement, and any credit taken by the firm may be contested by the authorities.