2024 (3) TMI 1179 - AT - Service Tax

Levy of Service tax - Banking Financial Services - providing corporate guarantee on behalf of its sister concerns to lenders but had not charged any commission or interest or fees for providing the guarantee - demand has been made only on a notional amount which, according to the Revenue, the respondent could have received had it charged its sister concern for providing the guarantees - HELD THAT - Service tax can be charged on the consideration received for providing taxable services. In other words, there must be a service provider, a service recipient, a taxable service and a consideration. The service provider shall be liable to pay service tax on the consideration which it receives for providing a taxable service. Any amount which is received but which is not a consideration for providing a taxable service is not exigible to service tax. Similarly, if a service is rendered, but no consideration is received no service tax can be charged. It is for the reason that if the consideration received is zero any percentage will be zero itself. In the case of OLAM AGRO INDIA LTD VERSUS COMMISSIONER OF SERVICE TAX 2013 (11) TMI 1503 - CESTAT NEW DELHI it is recorded a show cause notice dated 03.04.2012 was issued covering the period October 2010 to 31.12.2011 proposing levy of service tax, interest and penalties for corporate guarantee commission remitted by the petitioner to the signatory entity and agency commission remitted for service provided by agents in respect of the export business of the petitioner . Thus, in both cases, a commission or other consideration was received for providing the taxable services and the dispute was whether service tax could be charged on such commission which is received. In the present case, there is not an iota of doubt that no consideration was received at all because the show cause notice itself says so. This being the position, it is found that the impugned order is correct and proper and calls for no interference. The impugned order is upheld and Revenue s appeal is rejected.

Summary

Issues involved: Appeal against order-in-appeal allowing respondent's appeal and setting aside order-in-original u/s 65 (12) of the Finance Act, 1994 for non-charging of commission on corporate guarantees.

Summary:
The Revenue appealed against the order-in-appeal allowing the respondent's appeal and setting aside the order-in-original passed by the Additional Commissioner. The issue revolved around the respondent providing corporate guarantees without charging any commission or fees. The Revenue contended that a notional value equivalent to fees banks would have charged should be considered as a consideration for service tax purposes, even though no actual consideration was received by the respondent.

The Commissioner (Appeals) set aside the order-in-original, citing previous decisions that activities like these were not chargeable to service tax. The Revenue argued that corporate guarantees should fall under Banking & Financial Services, thus service tax should be charged on the consideration received for providing such guarantees. However, the respondent contended that no consideration was received for the corporate guarantees provided.

After considering the submissions, the Tribunal found that no consideration was received by the respondent for the corporate guarantees provided. It was established that service tax can only be charged on consideration received for taxable services, and since no consideration was received in this case, no service tax could be charged. The Tribunal upheld the impugned order, rejecting the Revenue's appeal and providing consequential relief to the respondent.