Submission of Service Tax paid challans / Copies of returns to claim Service Tax charged in Invoices

[KOHINOOR MITRA]

A Service vendor is Registered with Service Tax authrorities for provision of services like Works contract , Repairs & Maintenance and the like. A ciustomer awards a servcie job on the contractor. When the contractor claims over and above the service charges  against Service rendered to the customer to the extent of Service Tax , the customer insists on submission of Service Tax paid challns and a CA Certificate towards confirmation of Service Tax paid on the invoice raised. Over and above the last filed ST Return is also demanded .

My query is whether the above demand by the customer legally tenable ? Is there any decided cases or law in favour or against the contention of the customer ?

Kohinoor  Mitra.

Mobile No: 98303 09211

[NEERAJ KUMAR, RANCHI]

Dear Mr Mitra,

As far as I understand,  there is no any such statutory provision in the law on the bais of which such documents can be demanded by the service recipients. But at the same time I would like to mention that Under cenvat credit Rules this is the responsibility of the person taking credit of cenvat to make sure before taking such credit that the same amount against which he is taking credit has been in fact paid. So if the service recipient is asking for the same he is not wrong at all, he may be trying just to be sure that the amount of service tax that he has paid to you has infact been deposited in govt . account. Hope answered your query.

With regards,

Neeraj

[kothapally Raji Reddy]

Mithraji,

Mr Neeraj has answered your query. Demand by the customer is to be looked at as taking precuation with regard to due discharge of service tax to the department. You have to appreciate a fact that taking credit on inputs service without actually paying the tax by the input service provider results in  loss of revenue to the exchequer. So please cooperate.

[KOHINOOR MITRA]

Dear Sirs,

Respecting all  yours  answers  still  I  beg  to  differ  pending  any more cofent reason.

My submission is as foolows :

Kindly refer to subrule 7 of Rule 4 of Ceenvat Credit Rules 2004.

I quote from the said rule : "The CENVAT credit in receipt of input service shall be allowed, on or after the day on which the invoice, billor, as the case may be, challan referred to in Rule 9 is received ...."   (emphasis added by myself to highlight.

Similar is the language with regard to taking cenvat credit on "inputs" if you read sub-rule 1 of rule 4.

As you have rightly pointed out that there is no particular rule/act where the requierment as at times demanded by any customer who would above all like to avail input Credit; but that does not mean that one interprets to satisfy something where the duty is cast on the service provider to deposit the tax wher he is not only a registered service provider but also require to deposit tax as per the law or else the law will be as stringent as I trust on "undue enrichment" at the expense of the Government revenue department. The cosequences of which I believe can be extremely painful for the assessee.

Even if I agree to your advice, why is that we do not submit such challans/returns  for claiming VAT/CST when raising puerly supply invoices ? The same logic as sugegsted by you should be deemed necessary since the purchaser would like to take Input Credit on the same. I think we should not go on extending this argument or else all the invoices be they supply or services will require above the basic supportings hordes of tax paying documents where a specific duty is cast on the vendor .

Further ,

a) .could any receiver of supply or service prove to the authorities by showing a paid challan that the tax so charged by the vendor was indeed paid by the latter ; nowhere a challan can prove the same since there will in all probability be numerious vendors at a time , and

b) what is the purpsoe of requiring copies of return to be submitted in case of service vendors - they are not required by law, and so those being its confidential document, I feel should never be parted with as it can fall into wrong hands creating poblems later.

Regards

Kohinoor  Mitra

[NEERAJ KUMAR, RANCHI]

Dear Mr Mitra,

HHaving all regards to your feeling, I wish to mention that the sub rule 4(7) that your have quoted doe not appear to be proper, I hhave mentioned the said rule here below, It states:

4(7)   The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in   rule 9.

Hope this wil clarify ur doubt.  Further,  Its  an issue just between you and your customer and not between you and the department, as I have earlier also stated in my previous reply that there is no any such statutory provisions, so  you are free no to follow his  words,

As far as VAT or CST is related , it cant be compared with central excise & service tax both are guided by different sets of rules and acts. So comparison between these two would not be wise. As far as conserving of documents/records is concerned, I must mention here that under central excise and serv ice tax you are required to preserve it for  last five years.

Again I would like to mention that it is an issue between you and your customer and the department is no where in picture, department is not asking you any thing so there is no issue of law, if you do not want you should give them returns and all.

Hope clarified your query.

with regards

Neeraj

[KOHINOOR MITRA]

Dear Sir,

I am a bit disturbed seeing your reply.

The Rule 4(7) as per Cenvat Credit Rules 2004,  has undergone achange with effect from April 1 2011. The change  is VERY SIGNIFICANT.

The new Rule is vide Noitification No: 13/2011-CE(NT) dated 31/03/2011, and I fully stand by what I quoted in my previous mail.

You are wriong sir. Please check again.You may refer to TAXMANN's publication "SERVICE TAX - HOW TO MEET YOUR OBLIGATIONS" written by Shri. S S Gupta , 31st edition. Refer to voulume 2 , page 2658.

However,  yes I have understood your comments and the message you wanted to convey , but with the new rule with effect from April 1 2011 you will find the langage gives more credence to us the service provider in the form of a "new" open to contest such attempts to force us to accept which is actually seems not legally tenable. It gives only an additional more forceful support.

As regards CST/VAt laws, I wanted to only make a somewhat parallel example to justify and nothing else. I know they are completely difefrent laws and have no relation with Service Tax regulations or more specifically  Finance Act 1994/Service Tax Rules/Cenvat Credit Rules 2004  for that matter.

Thankyou for your understanding and support.

Kohinoor  Mitra

AI Summary

Vendor Queries Legality of Customer's Demand for Service Tax Challans; Experts Debate Cenvat Credit Rules. A service vendor registered for service tax queries whether a customer's demand for service tax paid challans and CA certification for claiming service tax is legally tenable. Neeraj Kumar responds that while there is no statutory requirement for such documents, customers may request them to ensure the tax has been paid. Kohinoor Mitra argues that the Cenvat Credit Rules allow credit based on invoices, not additional documents, and that such requirements are not mandated by law. Neeraj clarifies that the issue is between the vendor and customer, not involving the department, and advises against unnecessary comparisons with VAT/CST laws. Mitra cites recent rule changes supporting their stance.