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TMI Blog2019 (2) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... of the word namely before such listing - only the services which are listed in Section 65(12)(a)(ix) ibid will be exigible to service tax under that group. A corporate guarantee is a guarantee given by the corporate to cover their own exposure or exposure of some other related entity to their bank. Bank guarantees are issued by Bank on a regular basis as part of their business of Banking. It is nobody s case that appellant is doing the business of providing corporate guarantee on a regular basis. The corporate guarantee that was entered into by appellant is only for the limited purpose of securing loans to its subsidiaries. Corporate guarantees are issued in order to safeguard the financial health of their associate enterprises and to provide it support. For banks, providing bank guarantee is part of their regular course of business and they charge rate on the higher side. Further, these are fool proof instruments of security of the customer and failure to honour the guarantee is treated as a deficiency of services of the bank under banking laws. Corporate guarantee is actually an in-house guarantee and is not issued to customers generally. There is no merit in the propositions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a consideration would be exigible to service tax under the category of "Banking and Other Financial Services" (BOFS). In consequent, three show cause notices were issued to the appellants as under:- Date of the Show Cause Notice Period Involved Service Tax proposed by the department 22.4.2010 2004 - 05 to 2008 - 09 11,92,05,000/- (along with interest) 20.10.2010 2009 - 2010 1,75,82,100/- (along with interest) 19.9.2011 2010 - 2011 2,66,97,600/- (along with interest) 2. These show cause notices were adjudicated vide a common adjudication order dated 28.9.2012 (impugned order) wherein inter alia the amounts proposed in the show cause notices were confirmed with interest thereon and penalties were also imposed under sections 76, 77 and 78 of the Finance Act. Hence this appeal. 3. When the matter came up for hearing, ld. counsel Shri Vishal Agarwal and Shri Akshit Malhotra appeared and argued on behalf of the appellants. Ld. counsel explained that wherever the appellant was called upon to furnish Corporate Guarantee, they requested their holding company Viz. Vedanta Resources P/c. London to furnish the same. For this, the holding company used to charge the appellant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This clarification also brings out that the intention of the Legislature was only to tax services which are provided by a bank or a financial institution or an institution similar to a bank / financial institution. 3.4 The second argument advanced is that as per the definition of BOFS what is covered is issuing a Bank Guarantee and not issuing Corporate Guarantee. The expression "corporate guarantee‟ is not mentioned anywhere in the definition. Therefore, there can be no liability for issuing corporate guarantee since it is entirely different from Bank Guarantee. In the definition of BOFS under section 65(12) of Finance Act, the Legislature has used the expression "namely‟ and specified the services on which service tax was leviable under that category, thus restricting the scope of the said taxing entry to only all those specified services. It is settled law that the general expression which precedes the word "namely‟ is confined to the itemized expression that follows the word "namely‟. The ld. counsel relies upon the ratio of the following case laws:- a. Sree Durga Distributors Vs. State of Karnataka - (2007) 4 SCC 476 b. State of Bombay Vs. Bombay E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was willful suppression or fraud on the part of the appellant. Further, when the issue involved is an interpretational one, extended period of limitation cannot be invoked. 3.9 Moreover, time and again, departmental audits were conducted and in none of the audits the department could find any infirmity with non-payment of service tax on the alleged services of issuance of corporate guarantee. Hence invocation of extended period alleging suppression of facts is clearly illegal and unwarranted. 4. The ld. AR Shri A. Cletus supported the findings in the impugned order. He adverted to section 65(105)(zm) and argued that the taxable service of BOFS means any service provided or to be provided to any person by a banking company or a financial institution including a non-banking financial company or "any other body corporate‟ or commercial concern in relation to banking and other financial services. He submitted that after the amendment, the services of banking and other financial services rendered by "any body corporate‟ would be a taxable service. Such body corporate need not be a Bank of financial institution. The adjudicating authority has rightly analyzed this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in the case of Eicher Motors Ltd. Vs. Commissioner of Central Excise, indore - 2016 (41) STR 721 (Tri. Del.) wherein it was inter alia held that with effect from 16.8.2002, the body corporate would also be liable to service tax for the activity of financial leasing under service tax category of BOFS. 5. Heard both sides. 6. The dispute that comes up for resolution is whether the commission received / paid by the appellant for providing / receiving corporate guarantees (CGs) to/from their associate / subsidiary companies would be exigible to service tax under the category of BOFS for the purpose of Finance Act, 1994. 6.1 For better understanding of the issue, it would be useful to reproduce the definition of BOFS as appearing in Section 65(12) of the Finance Act, 1994. "Banking and Other Financial Services" means - (a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or [commercial concern]*, namely:- (i) financial leasing services including equipment leasing and hire-purchase; Explanation.-For the purposes of this item, "financial leasing" means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above definitions, the main take aways from the aforesaid definitions as applied to the facts of the appeal can be listed as under:- i. The inclusion of the word "other body corporate‟ came about with effect from 10.9.2004, itself i.e. right from inception. ii. The definition of BOFS under section 65(12) is a comprehensive definition and not an inclusive definition. iii. In Section 65(12)(a), the only persons who have been made liable to service tax under this category are banking company, financial institution (including a non-banking financial company) any other body corporate or a commercial concern. iv. Further, after listing out the category of persons who would be exigible to tax under the category, the services provided by such persons which alone would be exigible to such taxes have been comprehensively and specifically listed out with the use of the words "namely‟. 6.4 Analysis of the second limb of argument would be sufficient to resolve the issue whether the activity of issuing Corporate Guarantee is taxable under BOFS or not. There is no allegation that the appellant herein has performed any of the category of services listed in Sl. No. (i) to (vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice dated 20.10.2010 has proposed the demand of service tax under BOFS on the premise that "any other body corporate that is providing bank guarantee for a consideration is liable to pay service tax from the date 10.9.2004". Para 7 of the same notice further alleges that "In the present case, the assessee stood guarantee to their associate / subsidiary companies for providing corporate guarantee for a consideration which is taxable. Further, the assessee paid corporate commission to a foreign company M/s. Vedanta Resources Plc. Inc. London in consideration of getting corporate guarantee to secure external commercial loans which is also taxable under reverse charge method". The same propositions are reiterated in the subsequent show cause notices dated 22.4.2010 and 19.9.2011. 6.6 From the facts on record, it is evident that the appellants did not provide "bank guarantee‟ to their associate companies in India, neither did they receive any "bank guarantee‟ from parent company abroad. What they provided / received was only a corporate guarantee to /from their associate companies for which exercise they had received / paid guarantee commission. The department has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue of corporate guarantee by the appellants was only to facilitate issue of bank guarantee by the bank, the activity by the appellant is nothing but a service in relation to issue of banking and other financial services. 6.10 This argument is flawed. In the first place, as already discussed above, the corporate guarantees were not issued to facilitate issue of bank guarantees by the banks but only as an instrument for obtaining external commercial borrowings. True, the words "in relation to" are very much present in the definition of taxable services under section 65(105)(zm) ibid. Nonetheless, the services that would come under this score will necessarily have to be those services which are intrinsically or inextricably connected with any of the services of banking or financial services which have been comprehensively listed in section 65(12) ibid. 7. Viewed in this light, we are of the considered opinion that the activity of issue of corporate guarantees by the appellant from their associate / subsidiary companies in India and also the procurement / receipt of corporate guarantee from their parent / associate company abroad will not come within the fold of section 65(12)(a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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