Rule 6(3) of Service Tax Rules, 1994 - Deficiency in Services

[ROHIT GOEL]

One of my client had provided services to his client and due service tax had been paid by assessee within stipulated time period on accrual basis in 2012-2016. But in march 2017, some of the bills got settled by the customer (Govt.) of Client stating that there is deficiency in services provided and therefore payment will against this bill will be restricted to a particular amount. After receiving this information from customer, client has issued a credit note in respect of same and adjusted the excess amount paid in different years.

Department is of the opinion that though the amount in question is allowed u/r 6(3) but the same shall be treated as cenvat credit and the same shall be allowed as per Cenvat Credit Rules. They are invoking the provisions of CCR that the source document in this case will be Invoice and it should be only 12 months old if you are claiming cenvat credit rules.

whether the contention of the department is right in respect of Rule 6(3) of Service Tax Rules, 1994. Please share case law also if possible.

Thanking you in anticipation

AI Summary

Tax Department's Stance on Credit Note Adjustment Challenged; Rule 6(3) of Service Tax Rules Cited by Respondents A client provided services and paid service tax on an accrual basis from 2012-2016. In March 2017, the government client settled some bills, citing service deficiencies, and the client issued a credit note to adjust the excess tax paid. The tax department claims this adjustment should be treated as CENVAT credit, invoking Cenvat Credit Rules that require the source document (invoice) to be within 12 months. Respondents argue that this restriction does not apply to credit notes, as it would defeat the purpose of Rule 6(3) of the Service Tax Rules, 1994. The department's stance is considered incorrect.