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2019 (2) TMI 1249 - CESTAT CHENNAIBanking and Other Financial Services” (BOFS) - providing corporate guarantee for a consideration - 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? Held that:- There is no allegation that the appellant herein has performed any of the category of services listed in Sl. No. (i) to (viii) under section 65(12)(a) ibid. The activity of “providing bank guarantee‟ under section 65(12)(ix) ibid under which head the show cause notice has premised the proposed demand, is under the residual category of services listed as “other financial services‟. But here also, a comprehensive and specific list of such residual services has been given and made absolute by usage 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 Revenue that the guarantee issued by the appellant was only “providing bank guarantee‟ by a body corporate and secondly, the commission received / paid for issue / receipt of such guarantees to / from associate / subsidiary companies are exigible to service tax liability under section 65(12)(a)(ix) of Finance Act, 1994. 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) ibid and in particular sub-clause (ix) of that provision. The appellant succeeds on merits. Time limitation - revenue neutrality - Held that:- The show cause notice dated 22.4.2010, 22.10.2010 and 19.9.2011 have been issued for the periods 2004 – 2011. The appellant has furnished the documents with regard to the audits conducted. The audit report conducted from 18.6.2007 to 29.6.2007 has not raised any objection of non-payment of service tax for providing corporate guarantee. Prior to this an audit was conducted from 19.9.2006 to 21.9.2006 and the report does not show any such objection. All these would go to show that the appellant has not suppressed any facts with intention to evade payment of tax - SCN invoking extended period cannot sustain - appeal succeeds on limitation also. Appeal allowed - decided in favor of appellant.
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