2024 (4) TMI 235 - AT - Service Tax

Classification of service - business support services or not - Guarantee Commission received for furnishing Corporate Guarantee - invocation of Extended period of Limitation - revenue neutrality - HELD THAT - Sequentially in order to ascertain its eligibility for levy of tax it is important to understand the meaning of Corporate Guarantee as well. Corporate guarantee is the act of undertaking the responsibility of the debtor s obligation, in this case, a company. The execution of Corporate Guarantee by the Appellant is merely an act of providing an instrument for securing loans and not even fundamentally connected to the services as described under Business Support services which includes those services to the tune of transaction processing, routine administration or accountancy, customer relationship management and tele-marketing which in its nature of extension includes those that are out sourced only to be interpreted within its scope for the purpose of levy of tax. Therefore, no merit can be found that the commission so received on such corporate guarantee by the Appellant will become eligible for taxation under the scope of Section 65 (104c) of the Finance Act, 1994. Extended period of limitation - Revenue Neutrality - HELD THAT - The show cause notice dated 09.10.2012 has been issued for the period 08.02.2008 to 30.06.2012. The Appellant states that post audit of January 2009 they were not subjected to any adverse treatment by the Department as regards levy of tax on Corporate Guarantee based on the responses submitted to the Department for the queries raised in the said audit. All this goes on to show that the Appellant has not suppressed any facts with intention to evade tax payment. Therefore, the show cause notice issued invoking extended period cannot sustain. Appellant succeeds on limitation as well. The impugned order set aside - appeal allowed.

Summary

Issues involved:
The issues involved in the present appeal are:
1. Whether service tax is liable on Guarantee Commission under 'business support services'?
2. Whether the Department correctly invoked an extended period of limitation against the Appellant?

Issue 1:
The Appellant, engaged in electricity generation, provided Corporate Guarantees for loans. The Department demanded service tax on Guarantee Commission, classifying it under Business Support Services. The Appellant argued that their services do not fit the definition of Business Support Services as per TRU circular and case laws cited. The Tribunal analyzed the definition of 'Support Services of Business or Commerce' and held that Corporate Guarantee does not fall under Business Support Services. The Tribunal referred to a relevant case law to support its decision.

Issue 2:
Regarding the extended period of limitation, the Appellant contended that they believed in good faith they were not liable for service tax on Guarantee Commission. They highlighted that no adverse treatment was faced post-audit in 2009. The Tribunal agreed with the Appellant, stating that the show cause notice invoking the extended period cannot be sustained. The Appellant succeeded on the limitation issue.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief.