Deduction of service tax on sale bill

This query is : Resolved

prabhu (Querist)
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22 January 2013 DEAR SIR
my client is manufacturer of power saving devices they generally take up projects to identify areas to reduce energy consumption [free of cost]

subsequently
they supply all the equipment's to user free of cost and recover the cost through the savings achieved over a period of time 3 years at the end of 3 years the material belongs to the buyer in this scenario my client raise a v a t bill on monthly basis

however since the memorandum of understanding is made before the supply of material some of their clients have deemed it to be contract & deducting TDS @2% on all their bills though my client does not mention about service tax or service bill anywhere in the bill

since their input is already there in the material procured to manufacture and supply it is deemed to be under v a t
but their client is misguided & is continuously deducting TDS

how should this be stopped
since this reflects on their 26AS form

And how will the service tax department treat this [will they accept it to be a mistake of the customer]

how will the income tax department treat this

please explain in detail

CA bhargava

CA bhargava (Expert)
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22 January 2013 The above case requires a thorough check of all the agreements and transactions ., this cannot be concluded in a single way., consult a good CA in this regard