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TMI Blog2024 (5) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... he act of providing a corporate guarantee is a separate mechanism to secure the lending transaction and is not related to the lending activity. It stated that the definition of Banking and Other Financial Services provided in Section 65(12)(a)(ix) of the Finance Act is restrictive and thus, the terms lending succeeded by the term namely has to be interpreted in a restrictive manner restricting the service only to lending activity. It further submitted that corporate guarantee is provided by a third party who is not privy or party to the loan or lending transaction. Therefore, the activity of the providing corporate guarantee is neither a lending activity nor an activity in relation to lending. We draw our support from the case of Olam Agro India Ltd. V. Commissioner of Service Tax, [ 2013 (11) TMI 1503 - CESTAT NEW DELHI] wherein it was held that a corporate guarantee does not fall within the ambit of Banking and Other Financial Services u/s 65(12) of the Finance Act , as well as upon the case Sterlite Industries Ltd. vs. Commr. of Central Excise [ 2013 (8) TMI 452 - CESTAT CHENNAI] , to hold that the providing of corporate guarantee does not fall within the ambit of lending activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as follows : - That the appellants are engaged in manufacture of Motor Bike and parts thereof. The parent company of appellant (M/s. India Yamaha Motor Pvt. Ltd.) is M/s. Yamaha Motors Co. Ltd., Japan. Based on an intelligence, department scrutinized the documents of the appellant. It was observed that the appellant has availed external commercial borrowings (ECBs) during the Financial Year 2009 - 10 to 2013-14 as follows:- Sr. No. Date of agreement Name country of the lender bank Type of borrowing ECB Amount of ECB in USD 1. 11.09.2009 Japan Bank for International Coperation, Tokyo ECD 12.20 million 2 16.10.2009 Mizuho Corporate Bank Ltd., Singapore ECB 7.80 million 3 12.03.2012 Citibank, Bahamas ECB 40 million 4 02.09.2013 Sumitomo Mitsui Banking Corporation, Singapore ECB 35 million 2. The appellants are also observed to have entered into ECB Agreement/ Guarantee Fee Agreements dated 25.06.2009 and 30.09.2013 which mandate issuance of guarantee by the parent company i.e. M/s. Yamaha Motors Co. Ltd., Japan. Department formed an opinion that the appellant (M/s. India Yamaha Motor Pvt. Ltd.) has obtained loan facility from various banks and to make the banks extend the loan to M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be deposited. It is mentioned that the service tax on the said transaction also stands deposited by the appellant on 07.05.2015 i.e. prior to the issue of order in original (OI- O). Hence the demand confirmed for the said amount vide the order under challenge is prayed to be set aside. Finally, the Show Cause Notice is objected as being barred by time. The extended period is alleged to have wrongly been invoked. The order under challenge which has confirmed the entire demand for the entire period, is therefore prayed to be set aside. Appeal is, accordingly, prayed to be allowed. 5. While rebutting these submissions, ld. Departmental Representative has reiterated the findings in the order under challenge where it has specifically been held that the issue involved is with reference to the act of lending. Hence the same has to be covered under the definition of Banking and Financial Services for pre as well as post period of negative list ( w.e.f. pre as well as post 1st July 2012). Ld. Departmental Representative has relied upon the following two decisions:- 1. M/s. Paramount Communications Ltd. vs. Commissioner of Central Excise, Delhi-I reported as 2018-TIOL-3820-CESTATDEL 2. M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults, operation of bank accounts; (b) foreign exchange broking and purchase or sale of foreign currency including money changing provided by a foreign exchange broker or an authorised dealer in foreign exchange or an authorised money changer, other than those covered under sub-clause (a); Explanation. - For the purposes of this clause, it is hereby declared that purchase or sale of foreign currency, including money changing includes purchase or sale of foreign currency, whether or not the consideration for such purchase or sale, as the case may be, is specified separately; The taxable service is defined under Section 65(105)(zm) also needs to be considered which reads as under : Taxable Service 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 . Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This fact is sufficient for us to hold that parent company of appellant cannot be covered under the category of such persons who would be excisable to tax under the category of BOFS. 9. We further observe that any activity cannot be called as service unless and until there is an element of consideration Now the definition of service in Section 65 B (44) of Finance Act, 1944 becomes relevant. It reads as follows : - Service means any activity carried out by a person for another for consideration and includes declared service but not includes the services listed in the negative list under section 66B of the Act . 10. Reverting to the facts of the present case, we observe that the Show Cause Notice itself recites that the parent company of appellant has given the corporate guarantee. Though there is guarantee fee agreements dated 25.06.2009 30.06.2013 executed between appellant and the parent company by virtue of which appellant is paying guarantee fee. But since it is already held that providing corporate guarantee cannot be called as providing BOFS, prior to 01.07.2012, the amount in lieu thereof cannot qualify for the definition of consideration as mentioned above. Apparently par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion since the payment stands already made, it cannot be demanded again. The order under challenge is wrong to that extent also. 13. We also observe that there is no evidence on record with respect to the observations of ld. Commissioner in Order-in-Original that the corporate guarantee given by the appellant has benefited the associate enterprises in two ways as quoted above. We further observe that issue is no more res-integra as has also been conceded on behalf of the department. The decisions relied upon by the appellant DLF Projects Ltd. (supra) and DLF Cyber City Developers (supra) have already held as follows:- 4. It is an admitted fact that the appellant has not received any consideration either from the financial institutions or from their associates for providing corporate guarantee, in that circumstances, no service tax is payable by the appellant. Moreover, the demand raised in the show cause notices are on the basis of assumption and presumption presuming that their associates have received the loan facilities from the financial institution at lower rate, therefore, the differential amount of interest is consideration, but there is no such evidence produced by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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