Service Tax - Payment through CENVAT credit account - Not a valid payment? CAN you pay service tax on your output service from CENVAT credit account? If your client is a Government of India undertaking or a Government Company, perhaps the answer is ‘NO’. Pay it at your own risk. There is every possibility that your client may not reimburse your tax for want of evidence, i.e., a bank challan. It is very common among many Government organizations to reimburse service tax to the service provider only on submission of documentary proof in the form of a Bank challan. If you pay from CENVAT Credit account, there will not be any challan and there will not be any reimbursement of service tax. When we came across an assessee paying service tax under multiple challans, we asked him, instead of paying tax under different challans, why can’t he pay total service tax under a single challan, he replied, “Sir, we need to submit challans to our clients who are mostly Government companies. Unless we match the service tax amount on the invoice with a challan, they don’t pay us the service tax.” Coming back to CENVAT issue, there is a big Coal mining company called Bharat Coking Coal Limited. It is learnt that the Company is refusing to reimburse service tax paid from the CENVAT credit account. The Board Secretariat of the Company has also issued strict instructions not to reimburse payment of service tax from CENVAT Credit account made by the contractors. The tender document as amended by the Functional Directors has the following conditions. 1. The quoted offer should be exclusive of Service Tax. Service Tax if it is legally payable by the Contractor under this Contract, will be reimbursed by BCCL on production of original challan of having made cash remittance of such Service Tax to the Service Tax authority. 2. Original Challan will be defaced by management by putting a stamp across the challan Defacement to be done with the following stamp: Reimbursed the Service Tax For Rs................................. For W.O. No.......................... Dated..................of BCCL. GM(F)I/c AFM Area......... 3. Copies of original challan duly attested by General Manager (F) I/c will be retained for subsequent use as per requirement. 4. Service Tax reimbursement will be made to the contractor for net Service Tax payment (Calculated service tax on the value of work less paid through CENVAT). 5. Copy of Returns of the firms showing all details of Service Tax should be furnished. 6. A self—certification declaring that the Service Tax amount claimed through the submitted voucher will not be further claimed for any other work. (The above information is extracted from a judgement of the Jharkhand High Court.) WHEN a Government company does not recognize payment from CENVAT Credit as a valid payment, who else will? How can they unilaterally decide not to reimburse tax paid through CENVAT credit to the contractors? In case of any doubt or need for clarification, they could have contacted the jurisdictional Central Excise officers or the Board. It is time the Board/Ministry gives a clarification and maybe a direction at least to the PSUs that they are required to reimburse the Service Tax paid either in cash or by CENVAT Credit. It should be made clear that payment by CENVAT Credit is as good as payment by cash. And that there is no requirement of cash payment of Service Tax separately for each service recipient. In fact in certain situations, even the Service Tax Department refunds the unutilised balance in the CENVAT Credit Accounts. The Government should inculcate respect for law at least in its own companies. A Government company refusing to recognize payment by CENVAT credit as good payment is blatantly violating a law framed by the Government. The Government should speak with one voice. for more similar blog visit: vkaprofessionals/
Posted on: Wed, 14 May 2014 05:46:16 +0000
Trending Topics
Recently Viewed Topics
© 2015