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

Service tax credit rules: credit depends on whether retained contract sums exclude tax and whether tax was actually paid to supplier.
Availing service tax/Cenvat credit while retaining a portion of contract payment depends on whether the retention is contractually confined to the service value exclusive of tax and whether the supplier was actually paid the service tax; absent payment within the prescribed period credit should be reversed until the tax is paid, potentially attracting interest, and factual proof in the contract and payment records is determinative.