https://www.taxtmi.com/forum/issue?id=111459 Credit notes issued to adjust penalties for quality deterioration are treated as a reduction of consideration that remains within the taxable ambit of service tax; recipients generally cannot claim cenvat credit on such penal adjustments because of lack of nexus to input services. The practical compliance route is for the service provider to reverse or adjust the tax entry in its accounts and for the parties to reflect the adjustment by deduction from the original payment, with any claim to input credit requiring demonstrable nexus to the taxable output service. en-us Sat, 04 Feb 2017 15:22:31 +0530 Thu, 23 Jan 2025 15:56:02 +0530 TaxTMI RSS Generator https://www.taxtmi.com/forum/issue?id=111459 Credit notes issued to adjust penalties for quality deterioration are treated as a reduction of consideration that remains within the taxable ambit of service tax; recipients generally cannot claim cenvat credit on such penal adjustments because of lack of nexus to input services. The practical compliance route is for the service provider to reverse or adjust the tax entry in its accounts and for the parties to reflect the adjustment by deduction from the original payment, with any claim to input credit requiring demonstrable nexus to the taxable output service. Discussion-Forum Service Tax Sat, 04 Feb 2017 15:22:31 +0530 https://www.taxtmi.com/forum/issue?id=111459