Input credit in case of bad debt

I have a problem on hand....

Our client has written off a sum in the books of accounts.

As they are only service providers and the amount in relation to service tax for the above written off amounts was not received the service tax was not paid. We have however claimed service tax input credit for the various services used in provision of service like telephone courier etc...

as no tax has been paid for the output of service, the officer wants to add back a proportion of the input claimed as these have not resulted in provision of services were tax has been received.

 

Our contention is no provision stands to this effect in either service tax or in the cenvat credit rules. The officer proposes to add back the sum for the past five years. 

Request your guidance on this matter at the earliest

 

Regards

Adhithya Srinivasan

Replies (2)

The availment of credit and the utilisation are 2 different asepcts. HC in Premier Tyres case an old excise credit decision.

Further it is well settled that there is no one to one corelation .

As mentioned by you there is no provision for the reversal in such circumstances.

It would be practically impossible to reverse such payments as even aprt payments would have to be given the same treatment.

Therefore the contention of the officer is illegal and will not stand the judicial scrutiny. See a good commentary and show them the provisions. 

Thank you very much sir.

Regards

Adhithya Srinivasan

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