2023 (6) TMI 1197 - AT - Service Tax

Levy of Service Tax - banking and other financial services (BOFS) - Body corporate - corporate guarantee commission received by the respondent for providing corporate guarantees for their subsidiary company PT Jindal Stainless Indonesia (Jindal Indonesia) - export of services or not - HELD THAT - The respondent does not fit in the definition of body corporate because they are not engaged in providing banking services and this issue has been clarified by the board circular dated 04.07.2006 wherein it has been clarified that the word any other person in Section 65(105)(zm) has to be read with principle of ejusdem generis with the preceding words. Further, in the case of M/S BANSWARA SYNTEX VERSUS CCE, JAIPUR 2009 (7) TMI 85 - CESTAT, NEW DELHI , the Tribunal while considering the similar issue of whether release of land building as well as machinery would only come under banking and other financial services or otherwise it was held that such amount received as lease rent would not be covered under Section 105 of banking and other Financial Services in the Finance Act, 1994. Since the services in question has been rendered outside India, the same is not taxable as they qualify as export of services in terms of rule 3 of export of service Rules, 2004. Extended period of Limitation - HELD THAT - The whole issue relates to interpretation of the law because the Department was not certain of the taxability of the impugned services and the definition of banking and financial service was changed from time to time. Hence the extended period cannot be invoked and by that entire demand is barred by limitation as the demand pertains to the period 2005-2008 whereas the show cause notice was issued on 24.09.2010 which is beyond the normal period of limitation. There is no infirmity in the impugned order passed by the Ld. Commissioner - Appeal dismissed.

Summary

Issues Involved:
1. Whether the corporate guarantee commission received by the respondent is exigible to service tax under the category of Banking and Other Financial Services (BOFS).
2. Whether the show cause notice was vague and inconclusive.
3. Whether the extended period of limitation can be invoked.

Summary:

Issue 1: Exigibility of Corporate Guarantee Commission to Service Tax under BOFS

The core issue was whether the corporate guarantee commission received by the respondent for providing corporate guarantees for their subsidiary company PT Jindal Stainless Indonesia would be exigible to service tax under BOFS as per the Finance Act, 1994. The Tribunal analyzed the definition of BOFS under Section 65(12) of the Finance Act, 1994, which includes services provided by a banking company, financial institution, non-banking financial company, or any other body corporate or commercial concern.

The Tribunal found that the respondent does not fit the definition of a body corporate engaged in providing banking services. This interpretation was supported by a board circular dated 04.07.2006, which clarified that the term "any other person" in Section 65(105)(zm) must be read with the principle of ejusdem generis with the preceding words. Additionally, the Tribunal relied on several judgments, including Banswara Syntec and Sterlite Industries India Ltd., which distinguished corporate guarantees from bank guarantees and concluded that corporate guarantees are not covered under BOFS.

Issue 2: Vagueness of Show Cause Notice

The respondent argued that the show cause notice failed to specify the sub-category under Section 65(12) of the Act under which the alleged services are taxable, rendering the notice vague and inconclusive. The Tribunal accepted this argument, referencing decisions such as Micromatic Grinding Technologies Limited and Commissioner of C.Ex. Vs. Brindavan Beverages (P) Ltd., which emphasize the need for specificity in show cause notices.

Issue 3: Extended Period of Limitation

The Tribunal noted that the entire demand was barred by limitation because the period involved was 2005-2008, and the show cause notice was issued on 24.09.2010. The Tribunal held that the extended period could not be invoked as the issue related to the interpretation of law, with the department itself being uncertain about the taxability of the services. This position was supported by the case of Bharat Hotels Ltd. Vs. Commissioner of Central Excise.

Conclusion:

The Tribunal upheld the impugned order passed by the Commissioner, which dropped the demand for service tax, and dismissed the appeal filed by the department. The Tribunal concluded that the corporate guarantee commission received by the respondent does not fall under BOFS, the show cause notice was vague, and the extended period of limitation could not be invoked.