2010 (11) TMI 153 - AT - Service Tax

Waiver of pre-deposit - Banking and Financial Services - The appellant had provided corporate guarantee to State Bank of India for loans taken by another entity M/s. Ecovinal International Pvt. Ltd - The demand is on account of the consideration received by the appellant for providing the corporate guarantee is covered under Business Support Services and hence, liable to pay tax. Held that provision of guarantee is specifically covered under other Banking and Financial Services classified under Section 65(12) of the Finance Act, 1994 - Therefore, the decision of the Tribunal in Dr. Lal Path Lab (P) Ltd. v. CCE, Ludhiana 2006 -TMI - 761 - Appellate Tribunal, New Delhi , the impugned activity could not have been subjected to tax under BSS - Hence, complete waiver of pre-deposit of the dues adjudged against the appellants and stay recovery.

Summary

Issues:
Waiver of pre-deposit of service tax, interest, and penalty under Section 78 of the Finance Act, 1994 for providing "Business Support Services" (BSS) including corporate guarantee.

Analysis:
The appellant sought waiver of pre-deposit of service tax, interest, and penalty amounting to Rs. 4,91,520/- imposed for providing "Business Support Services" (BSS) during a specific period. The appellant failed to follow statutory procedures, leading to the imposition of tax liability. The impugned order upheld the decision of the Original Authority. The demand arose from providing a corporate guarantee to State Bank of India for loans taken by another entity.

The appellant's Chartered Accountant argued that the service provided fell outside the scope of BSS as clarified by the TRU circular dated 28-2-2006. He relied on the definition of BSS and highlighted that activities like providing a guarantee are covered under Banking and Financial Services, not BSS. Citing a Tribunal decision, he contended that the impugned activity should not be taxed under BSS. The JDR, however, defended the order, claiming that the provision of a corporate guarantee was within the wide definition of taxable services.

After considering the arguments and case records, the Tribunal found merit in the appellant's submissions. It agreed with the Chartered Accountant that a corporate guarantee is properly classified under Banking and Financial Services, not BSS. Referring to the TRU clarification, the Tribunal noted that similar activities were not covered under BSS. Consequently, the Tribunal ordered a complete waiver of the pre-deposit of dues and stayed the recovery pending the appeal's decision. The judgment was pronounced and dictated in open court.