Dear Members,
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
Request - please support your reply with some departmental clarfication i.e. circular etc. or any case law in this regard.
Regards
Sameer
CAclubindia
