2024 (5) TMI 1401 - AT - Service Tax

Non-payment of Service Tax - demand - Corporate Guarantee and margin retained for cargo space booking - Whether provision of corporate guarantee without consideration is taxable - profit/markup is liable to service tax - HELD THAT - The issue of taxability of providing Corporate Guarantee without any consideration was dealt at length by this Tribunal in the case of Commissioner of CGST Central Excise Vs Edelweiss Financial Services Ltd. 2023 (4) TMI 170 - SC ORDER wherein it was held that any activity must, for the purpose of taxability under Finance Act, 1994, not only, in relation to another, reveal a provider , but also the flow of consideration for rendering of the service. In the absence of any of these two elements, taxability u/S 66B of Finance Act, 1994 will not arise. It was held that there is no consideration insofar as corporate guarantee issued by respondent on behalf of their subsidiary companies is concerned. The issue on taxability of service tax on profit/mark up is no more res integra as the same has been decided in catena of decisions, the latest being the judgment in the case of M/s Tiger Logistics (India) Ltd., vs Commissioner of Service Tax-II, Delhi 2022 (2) TMI 455 - CESTAT NEW DELHI . Thus, we uphold the impugned order and dismiss the appeal.

Summary

Issues involved:
The appeal against the dropped demand due to non-payment of Service Tax on Corporate Guarantee and margin retained for cargo space booking.

Corporate Guarantee Issue:
The Department appealed against the dropped demand, arguing that the Corporate Guarantee provided by the appellant should be taxable as consideration is implied. The Department contended that the dropping of the demand was not legal as the appellant failed to maintain required registers and did not provide supporting documents for the Corporate Guarantee.

Booking of Space Issue:
The Department argued that the service provided by the appellant in booking space for cargo transportation qualifies as Business Auxiliary Service under Section 65(19) of the Finance Act 1994. The Commissioner (Appeals) erred in setting aside the demand according to the Department.

Respondent's Defense:
The Respondent's Chartered Accountant defended the case, stating that the allegations were based on assumptions without legal backing. They cited precedents where Corporate Guarantee without consideration was not taxable and emphasized the non-taxability of profit/markup based on legal decisions.

Judgment:
The Tribunal considered the issues of taxability of Corporate Guarantee without consideration and profit/markup. It was noted that taxability in these cases is not new and has been extensively discussed in previous judgments. The Tribunal upheld the impugned order, citing legal precedents and dismissed the appeal based on the settled legal position.

Separate Judgment:
The judgment was delivered by HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) and HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) on 30.05.2024.