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TMI Blog2013 (3) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices rendered are Management Consultancy Service, Export Agency Services, furnishing guarantee for subsidiaries, holding of investments, marketing and project services and for this purpose, the appellants had entered into agreements with their group companies. 2. The appellants were providing Corporate Guarantee for the facilities sanctioned by them to their subsidiaries who are charged an amount as 'Guarantee Commission' for the facilities availed and a percentage, which is charged as 'Commitment Charges' on the unavailed portion. However, the appellants discharged the service tax liability only on 'Guarantee Commission', and not on the 'Commitment charges' they received. Hence, the appellants were called upon to produce the particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issuing corporate guarantee to Central Bank of India in connection with the limits extended by the Bank to various group companies of Simpson group. Since their funds are locked in, in case there is short utilization of the limits by any company, the said company is required to pay commitment charges. This by no stretch of imagination can be considered as guarantee commission for the purpose of service tax. (iv) that 'Guarantee commission' and 'commitment charges' are accounted as 'guarantee commission' only is totally erroneous. (v) that other financial services including lending, provisions of Bank Guarantee, etc., were added by Finance Act, 2006 with effect from 10-9-2004, the Board issued a Circular dated 10-9-2004. Para 19.2 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) S.T.R. 204 (b) Inox Air Products v. C.C.E. - (2007) TIOL 1250 (c) Thermax Limited v. C.C.E. - 2007 (8) S.T.R. 487 4. A personal hearing was held on 17-11-2011, Shri V.S. Manoj, Advocate, appeared on behalf of the appellant and None represented the respondent-department. 4.1 During the hearing, the advocate, in addition to reiterating the submissions made already in the appeal memorandum, further submitted that since the commitment charge is not on account of any service provided by his client to the group company, the demand of Service tax on the said amount is not sustainable. He also invited my attention to earlier Order-in-Appeal Nos. 155/2009 (MST) dated 8-12-2009 and 111/2010 (MST), dated 26-5-2010 passed by the then Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al :- "Interest means interest on loans and advances made in India and includes - (a) commitment charges on unutilized portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include- (i) Interest referred to in sub-section (1B) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (ii) discount on treasury hills;" 5.4 Section 2(28A) of the Income-tax Act, 1961 defines "Interest" as under : "Interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt incurred which would include deposit, claim or other similar right or obligation, as also in respect of any credit facility which has not been utilised. This statutory definition regards amounts, which may not otherwise be regarded as interest for the purpose of the statute. Even amounts payable in transactions where money has not been borrowed and debt has not been incurred are brought within the scope of the definition as in the case of a service fee paid in respect of a credit facility which has not been utilised. Even in cases where there is no relationship of debtor and credit or borrower and lender, if payment is made in any manner in respect of any moneys received as deposits or on money claims or rights or obligations incurred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom taxable value. Moreover, the appellant has also pointed out that TDS has been deducted on commission under Section 194H and TDS has been deducted on interest under Section 194A of the Income-tax Act, 1961. In other words, this itself shows the difference of the item which is in the nature of commission and which is in the nature of interest. 5.10 Rule 6(2) of Service Tax (Determination of Value) Rules, 2006 specifically excluded interest on loans with effect from 19-4-2006. Therefore, the impugned order-in-original has to be set aside. 6. In view of the above discussions and also in conformity with the decision in the appellant's own case for the earlier period by this appellate forum in the very same issue, I set aside the impugned O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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