Advance Forfieted

[Amit Nayak]

Dear Sir,

in my company ,one party was order to supply the material and we also received advance amount agt po amount ₹ 2800000.after the material is lying in our factory premises and the order was cancel.So,we take it in balance sheet as Advance forfieted amount in other income head.Is there any tax liability in this Forfieted amount as per section 66E(e).

Please advice .

AI Summary

Service tax on forfeited advance: forfeiture treated as fee/penalty and taxable under Section 66E(e).
Forfeited advance retained after order cancellation is treated as a fee/penalty for tolerating non lifting of goods and therefore constitutes a taxable service under the Finance Act provisions addressing specified services; commentators advise deposit of service tax and applicable cesses on the forfeited amount, characterising it as both income and a taxable service charge arising from the contractual breach.