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

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.