2023 (11) TMI 890 - AT - Service Tax

Levy of Service Tax - act of providing corporate guarantees to the subsidiary units for grant of loan from financial institutions without any consideration - HELD THAT - It is not in dispute that such corporate guarantees were provided by the appellant without any consideration. This is also clear from the show cause notice dated October 18, 2016 which, in paragraph 5.6, also mentions that since no commission or interest or fee was charged by the appellant from the associate enterprises for providing corporate guarantee, the amount corresponding to the commission received by banks has been taken into consideration. The Commissioner (Appeals) relying upon the decision of the Delhi High Court in DELHI CHIT FUND ASSOCIATION VERSUS UNION OF INDIA AND ANOTHER 2013 (4) TMI 630 - DELHI HIGH COURT as confirmed by the Supreme Court in UNION OF INDIA VERSUS DELHI CHIT FUND ASSOCIATION 2014 (3) TMI 306 - SC ORDER , has allowed the appeal filed by the respondent. In view of the decision of the Supreme Court and in view of the decisions relied upon by the Commissioner (Appeals) in the impugned order, this appeal would have to be dismissed and is dismissed.

Summary

Issues involved:
The issue involves the consideration of whether providing corporate guarantees to subsidiary units for loans without any consideration is subject to levy of service tax.

Summary:

The appeal was filed by the Department challenging the order passed by the Commissioner (Appeals) allowing the appeal by the respondent based on decisions of the Delhi High Court and the Supreme Court.

The main issue for consideration was whether providing corporate guarantees to subsidiary units for loans without any consideration is liable for service tax. The appellant provided such guarantees without any consideration, as noted in the show cause notice.

The Commissioner (Appeals) relied on the decisions of the Delhi High Court and the Supreme Court to allow the appeal by the respondent. The Department's authorized representative argued that the Additional Commissioner's order was justified.

The respondent's counsel referred to a recent Supreme Court decision where it was observed that providing corporate guarantees to group companies without consideration does not constitute a taxable service. Based on this and the decisions cited in the impugned order, the appeal was dismissed.

In conclusion, the appeal was dismissed in light of the decisions of the Supreme Court and the Commissioner (Appeals), as there was no demonstration that providing corporate guarantees without consideration would be a taxable service.