Service tax refund on bank guarantee

vijay (ACCOUNTANT) (24 Points)

13 June 2014  

Dear Sir,

We have availed bank guarantee worth Rs.2 crores and paid Bank commission @ 2% which comes toRs.20 lakhs + service tax of Rs.40,000/-. so total paid Rs.20 laksh 40 thousand..

We requested to reduce commission 0.5% ,After 6 months, bank approved commission rate to 1.5% and refunded Rs.5 Lakhs. but did not refund service tax on refunded amount.

Question: Whether can bank should refund service tax when refunded principal amount.?

Please answer.