Non-lifting of agreed quantity

[S.C. WADHWA]

Dear Expert,

The buyer has agreed to pay selling price minus cost of secondary packing ect exp which mutually agreed for not lifting the agreed quantity and the material will be destroyed in the supervision of buyer.

Now my query is in which account the said receipts to be booked as liquidated damages or penalty or in any other account. Whether this amount attracts service tax or not. Please give your reply immediately along with name of service/section in which this fall.

Regards,

WADHWA

[S.C. WADHWA]

Dear Expert,

Is it possible to raise invoice on buyer with agreed amount with charging of full rate of CST @5.25% and in some other case Excise duty @ 2% also. The material will be destroyed in the supervision of buyer being got expired. In this way taxes in one case 14.5% minus 5.25%=9.25% and in other case 14.5% minus 7.25% including excise duty=7.25% can be saved.

Please give your expert opinion immediately.

Regards,

WADHWA

[YAGAY andSUN]

On LD Service Tax is applicable. If goods are not fit for consumption, then, you may also seek permission to remission of duty.

AI Summary

Service tax applicability on liquidated damages where buyer pays for non-lifted goods; remission of duty possible if unfit. Receipts paid by a buyer for not lifting agreed quantity and for destruction under buyer supervision-if characterised as liquidated damages-are subject to service tax; where goods are unfit for consumption the seller may apply for remission of excise duty.