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TMI Blog2024 (2) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of commissions usually charged by the commercial banks for providing bank guarantee. Further, it is also found that the assessee-appellants did not charge any consideration for providing the corporate guarantees as stated in the SCN and as noted by the learned Commissioner in the impugned order. Insofar as levy of service tax is concerned, the same should be on the amount of consideration received for provision of such service. Thus, prima facie it appears that there is no element of service inasmuch as there is no consideration involved in providing corporate guarantee by the assessee appellants. The Co-ordinate Bench of this Tribunal had examined the issue of levy of service tax on provision of corporate guarantees by a company to its subsidiaries, on the basis of notional value equivalent to commission charged by banks for providing bank guarantees, in the case of M/S ULTRATECH CEMENT LTD. VERSUS COMMISSIONER OF CGST CX, MUMBAI EAST [ 2023 (10) TMI 1363 - CESTAT MUMBAI] . In this case, the Tribunal had held that insofar as levy of service tax is concerned, the same should be on the amount of consideration received for provision of such service. In the present case, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be sustainable. Appeal disposed off. X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the assessee-appellants were also charging consideration from the customers in the name of delayed paying interest, for allowing the customers to pay certain amount at a later stage and for that tolerance of act, customers were charged some additional amount. Therefore, the Department interpreted this as a declared service of 'agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act' covered by the definition of service under section 66E of the Finance Act, 1994. Accordingly show cause proceedings were initiated for demand of service tax for the disputed period i.e. from April, 2010 to March, 2015 along with interest under Section 73 ibid invoking extended period, besides seeking imposition of penalties under section 76, 78 ibid by issue of SCN dated 17.10.2015. After taking into account the detailed written submissions vide letter dated 16.12.2015 and after providing opportunity for personal hearing to the assessee-appellants on 17.01.2018, the learned Commissioner adjudicated the case by dropping the demand of service tax in respect of providing bank guarantees and by confirming the demand of service tax on tolerating the act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice has been defined in clause 44 of Section 65B ibid, as an activity carried on by a person for another for consideration and includes a declared service, inasmuch as the show cause notice itself states that no consideration has been paid by any of the subsidiary companies to the assessee-appellants for providing corporate guarantees, the demand cannot be sustainable. 4.2 On the other hand, the Committee of Chief Commissioners had expressed that though there is no visible consideration in the form of money or barter between the provider of the guarantee of the beneficiary, it however has benefited the subsidiary companies by way of improved credit rating which in turn has implicitly benefited the assessee-appellants though not visible in monetary terms. In this way the assessee-appellants have circumvented the prohibition imposed by RBI. It is claimed by the said Committee that this vital aspect has been ignored by the Commissioner in the impugned order and thus the act of providing corporate guarantee to the subsidiaries by the assessee-appellants is liable to service tax under the taxable category 'banking and other financial services'. 5.1 From the facts of the case, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brokerage fees or any other form, shall be paid by the borrowing company to the guarantor. In the present case, since there is no involvement of any commission amount in the form of consideration, we are of the considered view that the assessee-appellants cannot be saddled with the service tax liability as demanded in the show cause proceedings. 6.1 We find that the issue involved in the present dispute is squarely covered by the decision of this Tribunal in the case of Commissioner of CGST & Central Excise Vs. Edelweiss Financial Services Ltd.,- 2022-VIL-998-CESTAT MUMBAI Service Tax, wherein it was held as under: - "7. The adjudicating authority has, rightly, declined to be guided by the decision of the Tribunal in re Kaveri Agri Care Pvt Ltd as it is settled law that interim orders do not offer themselves as binding precedent and the lack of elaboration of the observation therein detracts from its employability to advance the case of Revenue. The decision of the Tribunal in re Neyveli Lignite Corporation Ltd deals with an entirely different set of facts and the explanation therein of 'guarantee', as commonly understood, for placing that dispute in a context is of no assistanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otional value equivalent to commission charged by banks for providing bank guarantees, in the case of M/s UltraTech Cement Ltd. Vs. Versus Commissioner of CGST & CX, Mumbai East in Service Tax Appeal No. 86341 of 2019 vide Final Order No. A/86800/2023 dated 09.10.2023. In this case, the Tribunal had held that "insofar as levy of service tax is concerned, the same should be on the amount of consideration received for provision of such service. In the present case, since there is no involvement of any commission amount in the form of consideration, the appellants cannot be saddled with the service tax liability as demanded in the impugned order." Thus, we find that our above views on the issue have been duly supported by the decision of the Tribunal in the above order. 7.1. In respect of the second issue i.e., demand of service tax on delayed payment charges, we find that the learned Commissioner has dismissed the contention of the assessee-appellants that only the service of stock broking is provided by them, and held that service of stock broking ends with buying/selling of shares; tolerating the act of delay in payment and refraining from not selling off the shares is an activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Act, 2017. 4. As can be seen, the said expression has three limbs: -- (i) Agreeing to the obligation to refrain from an act, (ii) Agreeing to the obligation to tolerate an act or a situation, (iii) Agreeing to the obligation to do an act. Service of agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act is nothing but a contractual agreement. A contract to do something or to abstain from doing something cannot be said to have taken place unless there are two parties, one of which expressly or impliedly agrees to do or abstain from doing something and the other agrees to pay consideration to the first party for doing or abstaining from such an act. Such contractual arrangement must be an independent arrangement in its own right. There must be a necessary and sufficient nexus between the supply (i.e. agreement to do or to abstain from doing something) and the consideration. 5. The issue also came up in the CESTAT in Appeal No. ST/ 50080 of 2019 in the case of M/s Dy. GM (Finance) Bharat Heavy Electricals Ltd in which the Hon'ble Tribunal relied on the judgement of divisional bench in case of M/s South Eastern Coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether the DPC collected by the appellants from their clients in those cases where the appellants have already made payments to the Exchange but has not recovered the same from their clients, are required to be considered as a part of the value of the services, so as to levy the Service Tax in respect of the same. We find that there is not much dispute on the facts. The DPCs are being collected by the appellants only from those clients, who have not paid them well within the time-limit period and the appellants being under a legal contract with the Exchange, had to deposit the value of the securities, sold or/and purchased by their clients. As such, the nature of the said DPCs being a penal charge, is established. Where there is no delay in making payments by the clients, no DPC is being charged from them. As such, one thing becomes clear that such DPC is not on account of any stockbroking services being provided by the appellants. In terms of clause 45 of the agreement entered by the appellants with investors, - "any amount overdue towards trading or any other reason will be charged with delayed payment charges". Perusal of the said clause reveals that the DPCs are coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of telecom service and therefore, does not form a part of the value of taxable service. (ii) Circular No. 121/02/2010-S.T., dated 26-4-2010 clarifies that detention charges in respect of detained containers are not in respect of service provided on behalf of client (under BAS) nor it on account of infrastructure support services (under BSS). Such charges can at best be called as 'penal rent' for retaining the containers beyond the predetermined period. Therefore, the amount collected as 'detention charges' is not chargeable to Service Tax. 2.1 In a similar manner, delayed payment charges received by the stock-brokers are not includible in taxable value as the same are not the charges for providing taxable services. Such charges are on account of delay in making payments by the service recipient to the service provider and are in the nature of a penal charge for not making the payment within stipulated time. Such amounts are not includible in the taxable value for charging Service Tax. This principle will also apply to other service providers. 3. However, Section 67 of the Finance Act, 1994 provides that Service Tax is chargeable on taxable value which shall be the 'gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clause 44 of Section 65B ibid, as an activity carried on by a person for another for consideration and includes a declared service, inasmuch as the show cause notice itself states that no consideration has been paid by any of the subsidiary companies to the assessee-appellants for providing corporate guarantees, by way of commission brokerage fees or any other form, the demand cannot be sustainable. 8.3 We do not find any infirmity in the said order of the Commissioner on the above issue at para 8.2. Admittedly, the Hon'ble Supreme Court vide judgement dated 17.03.2023 in the case of Commissioner of CGST & Central Excise Vs. Edelweiss Financial Services Ltd., (supra) while dismissing the Civil Appeal filed by the department had held that where the assessee had not received any consideration while providing corporate guarantee to its group companies and where no effort was made on behalf of the Revenue to assail the above finding or to demonstrate that issuance of corporate guarantee to group companies without consideration would be a taxable service, there is no need to entertain the appeal filed by the department. The Revenue in their Memo of Appeals has given no reasons to d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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