Service tax claim/refund/cenvat

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 December 2015 Query through a simple example-
We are doing Job work for a party X. We have sent 100 pcs @10/-. Bill as follows-
Job work- 1000
Service tax- 140
Total- 1140/-
Party X rejects 20 pcs and pass the bill in their books as follows-
job work- 800
service tax- 112
total- 912/-
Now, Party X is not issuing any debit note as bill was short passed by him. How do we settle our books? Can we claim excess Service tax paid of Rs.28/- If yes, what document is required and is there any time limit to claim???

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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16 December 2015 Obtain debit note and adjust the excess payment of service tax in the next payment.

Querist : Anonymous

Querist : Anonymous (Querist)

17 December 2015 But Sir party have passed short bill and not able to issue debit note. Is there any other option to claim??

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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24 July 2025 Yes, this situation — where the service receiver (Party X) short-pays the invoice and does not issue a debit note — is fairly common in service tax-era transactions. Here's how you can address it under the CENVAT Credit Rules and Service Tax provisions applicable before July 2017:

✅ Issue Summary:
You raised a bill for ₹1,000 job work + ₹140 service tax = ₹1,140.

Party X accepted only ₹800 job work + ₹112 service tax = ₹912.

Difference of ₹28 service tax is paid by you but not collected.

No debit note from the client.

✅ Can You Claim Refund or Adjust ₹28?
Yes — but only if you meet the documentary and procedural requirements. Since the customer isn’t issuing a debit note, you’ll need to consider Rule 6(3) of the Service Tax Rules, 1994:

📝 Option 1: Adjustment in Subsequent Service Tax Liability
Rule 6(3) of Service Tax Rules, 1994 permits adjustment of excess paid service tax if:

The excess payment is on account of a billing error, or

Tax paid on billed amount exceeds the amount realized from the customer, and

The service has not been provided to the extent billed, or

Service is deficient or partially rejected.

✅ In your case, partial rejection (20 pcs) qualifies for adjustment.

🔒 Conditions:
You must record in your books the reduced consideration.

Service was not fully provided (partial rejection).

Amount received is less than billed.

Service tax was paid in excess of the amount received.

📄 What Can You Do Without a Debit Note?
If Party X refuses to issue a debit note:

✅ Alternative Documentation You Can Maintain:
Payment advice / remittance note from Party X showing reduced amount.

Proof of amount received (bank statement) matching short-paid amount.

Internal note or credit note (though not enforceable, shows intent).

Correspondence with customer accepting reduced quantity.

These can collectively serve as a basis for justifying the adjustment, if challenged.

⏳ Time Limit:
There is no strict statutory time limit for adjusting excess service tax under Rule 6(3) if it's done through self-adjustment in future returns.

However:

Refund claim (in cash) under Section 11B of Central Excise Act (made applicable to service tax) must be filed within 1 year from the date of payment.

So, better to adjust the ₹28 in your next ST-3 return, citing partial rejection and excess tax payment.

✅ Recommended Steps:
Record reduced income and service tax receivable in your books.

Prepare a self-credit note or internal memo.

Adjust the ₹28 in next service tax payment/return.

Maintain email trail/payment proof from Party X.

🚫 Not Eligible for Refund If:
You’ve already passed on the tax burden.

You cannot substantiate excess payment with supporting records.

You miss the 1-year limit for cash refund (not applicable for adjustments).

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