Whether issue of guarantees to corporate entities liable to service tax?

PJ/CASE-LAW/2015-16/2757

Case: -INFRASTRUCTURE LEASING & FINANCIAL SERVICE LTD. VERSUS C.S.T., MUMBAI-I

Citation:- 2015(37) S.T.R. 487 (Tri.-Mumbai)

Brief facts:- The applicant is a banking financial company issuing guarantees to various corporate entities for that it is charging certain commission. The revenue is of the view that on the consideration received by the applicant, the applicant is required to pay service tax under banking financial institution services as per section 65(12) of the finance Act, 1994. Therefore the show cause notices were issued by which impugned orders demand of service tax; interest and penalty have been confirmed against the applicant for period 2004-2005 to 2009-2010. Applicant is seeking waiver of pre-deposit of the impugned demand at this stage.

Applicant’s contention :-It is the contention of the applicant that it is not providing any service under banking and other financial service as defined under section 65(12) of the finance Act 1994 as only guarantee issued by the bank is liable to service tax. It is further contended that it is not holding banking licence; therefore it is not required to pay service tax on the commission received by it for executing guarantees. In these circumstance, waiver of pre-deposit of service tax, interest and penalty sought by the applicant.

Respondent’s contention:- Ld. AR opposed the contention of the ld. Consultant for the applicants and submits that in this case applicant is having loan advanced by the banks. Therefore whatever corporate guarantees issued by applicant is indirectly covered by the bank guarantee only. Therefore, the applicant is required to pay service tax on the said transaction. It is further submitted that in one of the cases the applicant has provided guarantee through the bank. Further, it is submitted that as per the guarantee issued by the applicant is recoverable from the bank. Therefore, Revenue has rightly confirmed the demand of service tax against the applicants.

Reasoning of judgment: -It is no doubt that applicant is not a banking company service tax is payable only on issuance of bank guarantee issued by the bank. Further, we have seen the impugned order wherein in one case, the guarantee has been given by the bank; in that case, service tax has been paid and credit of the said service tax has not been availed by the applicant, further, we find that in the guarantee the word “bank” is mentioned wrongly instead of applicant itself. Admittedly the guarantee issued by the applicant does not bear or does not have any party as a bank. In these circumstances, prime facie applicant has made out a case for complete waiver of pre-deposit. Accordingly, we waive the requirement of pre-deposit of entire amount of service tax, interest and penalties and stay recovery thereof during the pendency of the appeals.

Decision:-Stay granted.

Comment:-The analogy of the case is that service tax is payable only on issuance of bank guarantee issued by a bank and as in the present case the appellant is not banking company, stay application was allowed.

Prepared by: Anas Kachaliya

Comments

PJ/CASE-LAW/2015-16/2757

Post a Comment

Query