Service Tax Credit - Clarification.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 November 2009 Dear Experts

Company "X" gets Job work done from Company "Y" and the Company "Y" (ob worker) charnges Service Tax on Job work charges. Company "X" also sells material to Company "Y". Now Company "X" has to pay to Company Y" on a/c of job work charges and on the other hand Company "X" also has to recover amount against the sales made to company "Y".
(Sale are being separate transaction)

Company X" instead of making payment to "Y" (on a/c of job work charges) adjust the amount payable towards the same agaisnt sales made to the Job worker.

WHETHER ADJUSTMENT OF SUCH NATURE WILL AMOUNT TO PAYMENT MADE AS PER SERVICE TAX RULES.

WHETHER COMPANY "X" IS ELIGIBLE TO TAKE CREDIT OF SERVICE ON THE JOBWORK CHARGES AFTER SUCH ADJUSTMENT.

PLEASE CLARIFY THE ABOVE IN THE LIGHT OF RULE 4 (7) OF CENVAT CREDIT RULES, 2004

Regards
Sameer

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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08 November 2009 Yes, the adjustment is amount to payment of dues. Further, the service tax charged by jobworker is eligible to take as input credit if it is in relation to manufacture of excisable goods or providing taxable services.

Hope the above clarifies you

Querist : Anonymous

Querist : Anonymous (Querist)

09 November 2009 On the face of transaction no body can deny that it is payment.
I am also confident that if we go for litigation we will 100 % win the case.

but............ it is seen that department go on for litigation by interpreting the law/rules in their way.

Hence I request you to please provide some departmental circular/clarification or any case law in this regard.

Regards
Sameer

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