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2024 (2) TMI 967 - CESTAT MUMBAIClassification of services - banking and other financial services or not - service of giving bank guarantee - Demand of service tax on delayed payment charges - Dropping of demands in respect of the assessee-appellants providing corporate guarantees to their subsidiary companies on the ground that it cannot be brought under the definition of ‘banking and other financial services’ provided under Section 65 (12) ibid. Classification of services - banking and other financial services or not - service of giving bank guarantee - HELD THAT:- The department had accepted that the assessee-appellants had not charged any commission/fees to the overseas subsidiary companies as well as to the subsidiary companies situated in India for issuance of the corporate guarantee. However, the service tax demand was proposed on the 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 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, above views on the issue have been duly supported by the decision of the Tribunal in the above order. Demand of service tax on delayed payment charges - HELD THAT:- From Circular dated 28.02.2023, it is clear that in the present case in the absence of any contractual obligation or flow of consideration for the specific act of tolerating an act etc., it cannot be said that such delayed charges in payment by a client in payment for purchase of shares could be said to be a service under the category of declared service for the purpose of levy of service tax, that is separate from the stock broking services. The issue of Delayed Payment Charges (DPC) arising in the context of purchase of shares have been addressed by the Co-ordinate Bench of this Tribunal in the case of Religare Securities Limited Vs. Commissioner of Service Tax, Delhi [2014 (4) TMI 588 - CESTAT NEW DELHI] by holding that the same is not liable to service tax. Thus, there are no merits in the impugned order, insofar as it has confirmed the adjudged demand on the assessee-appellants in respect of delayed payment of charges paid by the clients for the actual delay, if any, in payment for the purchase of shares or other stocks, which are in no way can be considered as service of ‘tolerating or refraining from an act, or to tolerate an act or a situation, or to do an act”. Therefore, by setting aside the impugned order to this extent, the appeal is allowed in favour of the appellants. Dropping of demands in respect of the assessee-appellants providing corporate guarantees to their subsidiary companies on the ground that it cannot be brought under the definition of ‘banking and other financial services’ provided under Section 65 (12) ibid - HELD THAT:- In respect of the period after 01.07.2012, even though the taxable service 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, by way of commission brokerage fees or any other form, the demand cannot be sustainable. Appeal disposed off.
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