Eligibility of CENVAT credit on Liquidating Damages -reg

[vinay wakde]

We shall be received compensation (liquidating Damages) for non-lifting of material in terms of contract with our parent company. In the matter kindly let us know the following:-

1. Whether liquidating Damages is service?
2. Who is liable to pay service tax under section 66E of the Finance Act.
3. Under which category of services it falls?
4. Whether CENVAT is eligible ?

Your valuable guidance shall be immensely help us to avoid any litigation in future,

With regards,

VINAY

[Suryanarayana Sathineni]

Dear Friend,

The nature of the income received by you covered under Declared services and liable to pay service Tax.

Best Regards

Suryanarayana

[vinay wakde]

Sir, kindly guide us under which category of service we have to deposit service tax and also let us know whether we can claim input service credit.

Regards,

VINAY

[MUKUND THAKKAR]

Dear

under which service you had recover LD. pay the service tax under the same category of service you have to deposit service tax. which documents will be issued by you for recover LD from customer? check the eligibility of document for credit of service tax.

[KASTURI SETHI]

Dear Sh.Vinay Wakde,

Point-wise reply is as under :-

1. It is declared service under Section 66 E(e) of the Finance Act.

2. You have received consideration for providing taxable service in terms of Section 66 E(e) and your activity conforms to the definition of Service under Section 65 B(44).

3. It is covered under the category, 'Other Than Negative List' Accounting Code 00441480.

4. Cenvat Credit is admissible if it is your input service for providing taxable output service.

FURTHER SUGGESTION

Kindly go through reply of Issue ID No.107261 dated 2.9.14. M/s. Yagay and Sun have filed very comprehensive reply on 3.9.14. Sh.Rangnathan Sir also filed reply on 2.9.14. Both replies will solve your problem in detail. Both the replies are still relevant as per present law.

 

[vinay wakde]

Thanks for your valuable guidance.

With Regards,

VINAY

[KASTURI SETHI]

Sh.Vinay Ji,

Credit goes to M/s.YAGAY AND SUN.You should be grateful to them and not me. I have only searched their reply. Their reply is very comprehensive and leaves no doubt.

Anyhow I have observed that most of the querists are not courteous. You always express gratitude. I like this nature very much.

[Ganeshan Kalyani]

M/s.YAGAY AND SUN is the oldest experts in this Forum ranking number one. Hats off to him / his team for contributing to this forum by answering more than three thousand queries. Thanks.

[KASTURI SETHI]

Yes Sir. Their replies are 99.99 % error proof. But we are missing them since 2.3.16. We are deprived of their valuable knowledge and interpretation of law. M/s. YAGAY AND SUN are requested to come back to the pavilion (Home Ground).

AI Summary

Liquidated damages treated as declared taxable service under section 66E(e), service tax payable and CENVAT credit allowed as input service where used.
Liquidated damages received as contractual compensation are treated as a declared taxable service and the recipient recovering such amounts must pay service tax under the same service category; CENVAT credit is admissible only if the inputs or input services are used in providing the taxable output service comprising the liquidated damages and supporting documents meet credit conditions.