Input service credit taken on retained amount of service providers -reg

[vinay wakde]

We have retained 10% amount from some of our service providers as performance retention as per the contract. However, we have taken full credit as indicated in the invoices. We have received a show cause notice from the Department for not making full payments to the service providers on the date of taking credit of Service Tax. In our reply to show cause notice, we rely upon CBEC Circular No 122/03/2010-ST dated 30-04-2010 and Hindustan Zinc Ltd V/S Commissioner of Central Excise Jaipur II, reported in 2011(21) STR 600(Tri-Del) - 2010 (12) TMI 342 - CESTAT, NEW DELHI

Is there any CESTAT judgement latest reported in E.L.T. or any clarification from C.B.E.C. in the matter.

Regards,

VINAY

AI Summary

Company Challenges Show Cause Notice on Service Tax Credit Claim; Cites CBEC Circular and Legal Precedent A company retained 10% of payments to service providers as performance retention but took full service tax credit as per invoices. The tax department issued a show cause notice for not making full payments before claiming the credit. The company cited a CBEC circular and a legal case to justify its actions. Discussions among forum participants focused on whether retaining part of the payment, excluding the service tax component, affects the ability to claim full credit. It was suggested that if the retention is clearly from the basic amount and not the tax, the credit claim should be valid.