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over stay compensation

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(Querist)
01 April 2008 we are into mechanical construction, we had a project which has to be completed in 6 months, but due to non availability of work front because of client problem we completed the job in 10 months. For that we claimed and received the over stay compensation for being idle of men and machinery. now my query is that are we entitled to collect and pay service tax for the money we received as over stay compensation which is not a service?
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Dayal

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Dayal (Expert)
02 April 2008 If this was an agreed clause for compensation, then it will not be covered as it is not associated with rendering of the service.

It is a penalty, that was required to be paid under an arrangement as such will not form a part of the taxable value for the purpose of service tax.

this may be charged seperately and stating the description as penalty charges for delayed project work on part of the client
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Dayal

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Dayal (Expert)
03 April 2008 IF you need any judgement in this regard please write back to dmassocaite@gmail.com
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