Service tax "under protest"

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Gireesh Hegde (Querist)
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22 October 2011 Hi,

Can anybody give me a clear idea about Service Tax "Under Protest".Also in which case we have to follow this?

Thanks.
Gireesh

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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24 October 2011 When one is not sure of the classification and consequent liability the possibility of demand along withinterest and penalty exists.
Therefore when in doubt payment under protest and charging the client and collecting can be opted for.
A letter stating why the same is being paid under protest has tobe filed.
If thematter is taken up and decided in your favour the client can gfo for the refund and after that date you may stop paying the ST.
Practically too much time is taken in resolving issues wityh the revnue intewrested in escalting the matter upto higher levels and even to the apex court.

Gireesh Hegde

Gireesh Hegde (Querist)
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24 October 2011 Thanks a lot for your reply Mr.Madhukar Sir.

Can i know where i can get supporting documents/ websites / reference to know more about this?

Thanks.
Gireesh

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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25 July 2025 Hey! Here's a clear explanation about **Service Tax "Under Protest"** and when to use it:

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### What is Payment of Service Tax **Under Protest**?

* **"Under Protest"** means you pay the disputed service tax amount to the government, but **you clearly state that you are paying it without admitting liability or waiver of your rights to contest it later.**
* This is done to avoid **penalties, interest, or legal trouble** due to non-payment while the classification or applicability of service tax is uncertain or disputed.
* You essentially **reserve your right to challenge the demand later in courts or through appeals**, while avoiding immediate repercussions.

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### When to Pay Service Tax Under Protest?

* When you **genuinely believe you are not liable** to pay service tax but the department issues a demand or the law is ambiguous.
* When there is **uncertainty or dispute about classification of services** and you want to avoid penalties for non-payment.
* When **service tax demand is raised but you want to avoid interest or penalties while disputing the demand**.
* If you want to **avoid blocking your business operations or legal troubles** pending dispute resolution.

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### How to Pay Under Protest?

* Make the payment of service tax as demanded.
* File a **written declaration/letter** clearly stating the payment is made **"under protest"** and specifying the grounds on which you dispute the tax liability.
* Maintain all correspondence and supporting documents.

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### Benefits of Paying Under Protest

* Avoids legal penalties and interest for non-payment.
* Keeps your case open for appeal or litigation.
* Shows goodwill and compliance to the tax authorities.

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### References & Where to Learn More:

* You can refer to **Circulars by Central Board of Excise and Customs (CBEC)** — often available on the official CBIC website: [cbic.gov.in](https://www.cbic.gov.in)
* **Service Tax Rules and Notifications** under the Finance Act.
* **Case laws** where courts have accepted "payment under protest" as valid.
* Legal commentaries and tax professional portals like:

* Taxmann
* ClearTax
* CAclubindia forums

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If you want, I can help draft a sample "payment under protest" letter or guide you to specific circulars or case laws. Would you like that?

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