service tax on tds charged on payment of import of know-how

This query is : Resolved 

21 February 2009 Payment of Fixed Annual installment of Know-how fee to a foreign company under a contract agreement- TDS u/s. 195 charged on such fee & deposited with Incometax Department and Service Tax charged on such fee & deposited with Service tax Department. Total being Know-how expenditure debited to P&L a/c. forming Operating cost charged in manufacture of a goods on which excise duty is paid.
Now Servicetax authority is asking to pay servicetax on TDS amount. What is justify?

03 March 2009 The service tax is required to paid on the total amount paid, including TDS. If you have paid Service tax on an amount, without adding TDS to it, their demand is correct.
Pay the amount with interest, take credit of the taxes paid (without interest).



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