Service tax impact on credit note issued against penalty amount hold by customer

[Guest]

Dear Colleagues,

I have query related to service tax . A service provider has raised an invoice for providing services and also giving an assurance for maintaining the quality of material. He raised an invoice for services say ₹ 2 cr + service tax. Now service recipient has raised a claim of ₹ 10 lac for quality deterioration. Now please suggest us whether service tax is applicable on ₹ 10 lac credit note on not ? If yes is there any case law ?

Regards

Rakesh Mittal

09643356753

AI Summary

Debate on Service Tax Applicability for Penalty Claim Credit Notes: Issues with CENVAT Credit and Input Service Proof A service provider raised a query about the applicability of service tax on a credit note issued for a penalty claim by a service recipient due to quality deterioration. The discussion involved several contributors debating whether service tax should be applied to the penalty amount and if the service provider can reverse the service tax in their books. The consensus was that CENVAT credit may not be allowed on such transactions, and it is challenging to prove the penalty as an input service related to taxable output service. It was suggested that the penalty amount be deducted from the original payment.