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2023 (8) TMI 1144 - AT - Service TaxLevy of Service tax - corporate guarantee against loan obtained from various financial institutions in exchange of credit protection fee - Banking and Other Financial Services or not - invocation of extended period of limitation - HELD THAT:- In the common parlance ‘corporate guarantee’ is a guarantee of one corporate unit to keep itself responsible for the financial obligations or any other contractual obligations of the principal debtor to the creditor on behalf of principal debtor while ‘bank guarantee’ is a guarantee given by the bank on behalf of the applicant to cover its payment obligations to third party. What can be observed is that both bank and corporate guarantees are meant “to provide assurances to the beneficiaries” with same thin line distinction that while bank guarantee relies on the credit worthiness of a financial institutions, corporate guarantee depends on the credit worthiness of the parent-company/guarantor. Further, while bank guarantee involves a third party institution as guarantor, corporate guarantee involves a company within the same corporate group or structure as a guarantor - while referring the provisions contained in Section 65(12) of the Finance Act, 1994, may be because of typographical error or due to oversight of the provision clearly enumerating words as “providing bank guarantee” under sub-clause (ix) of the said provision, it has been noted that specific enumeration about ‘corporate guarantee’ was not available for which legislative intent is unarguable. When both corporate guarantee and bank guarantee are held to be akin (similar to something) to each other, the only inference that can be drown is that incorporation of one of it would mean presence of the other. Having said so there are no second opinion on the issue that purpose of ‘corporate guarantee’ and ‘bank guarantee’ are one and same and while one is the species the other one is its genesis The appellant having received consideration against providing guarantee to its related company M/s Lavasa Corporation Ltd in the form of ‘corporate guarantee’ and ‘credit protection guarantee’ service is liable to pay service tax and, therefore, demand raised against the appellant is justified except for the extended period since the issue remained unsettled due to divergent opinion expressed by different judicial forums - appeal allowed in part.
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