Non lifting of agreed material, Service Tax

[S.C. WADHWA]

Dear Expert,

1.	A Company entered into a contract
	for manufacturing of 1000 kgs of a particular
	product with another company.
2.	It manufactured 1000kgs but the buyer could not
	purchase the entire quantity.
3.	The company raised debit note for compensation
	excluding taxes for material not purchased by it.
4.	The product is excisable. Amount of debit note is
	₹ 20 lacs.
	Query is:
1	Whether it is covered under declared service.
2	If yes, whether service tax would be levied or not.
3	The company is not registered as service provider
	Whether it has to get registration under service tax
	as service provider. Please give your expert opinion. Regards, WADHWA

Posts / Replies

[bhart b sharma]

there is manufacturing but no clearance of final product so no excise duty is applicable in this case.

secondly, service tax is imposed on value realised by the service provider in lieu of services that are rendered to the service recipient. in this case, it is disputed amount which is raised by way of debit notes - a sort of civil penalty and recourse would be to settle in a civil suit.

regarding procurement of service tax registration on account of having raised a debit note, there appears to be no requirement of service tax registration as no service appears to have been provided