MANU/CE/0092/2024

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI

Service Tax Appeal No. 51967 of 2018

Decided On: 27.03.2024

Appellants: The Commissioner, Central Excise & Service Tax, Delhi South Commissionerate Vs. Respondent: Pharmax Corporation Limited

Hon'ble Judges/Coram:
Binu Tamta, Member (J) and P.V. Subba Rao

DECISION

P.V. Subba Rao, Member (T)

1. Revenue has filed this appeal to assail the order-in-appeal dated 28.03.2018 passed by the Commissioner of Central Tax, Appeals - II, Delhi whereby he allowed the appeal of the respondent herein and set aside the order-in-original dated 05.05.2017 passed by the Additional Commissioner.

2. M/s. Pharmax Corporation Ltd.1 provides various services and pays service tax on them. During the course of audit and scrutiny of balance sheets, it was found that the respondent had provided corporate guarantee on behalf of its sister concerns to lenders but had not charged any commission or interest or fees for providing the guarantee. It is the case of the Revenue that had the sister concerns approached other banks or institutions to obtain a guarantee of equivalent amount, the banks would have charged them certain fees. Such fees would have been taxable at the hands of the banks under the category of "Banking & Financial Services". Therefore, even though the respondent had not received any consideration for the corporate guarantees which it had provided, a notional value equivalent to the amount which banks could have charged for similar services should be taken as a consideration and service tax should be charged on such notional amount.

3. There is no dispute that no consideration was received by the respondent firm in these transactions. A show cause notice dated 24.04.2015 was issued to the respondent invoking extended period of limitation and demanding service tax amounting to Rs. 81,13,864/- along with interest and penalties. These proposals were confirmed by the Additional Commissioner in his order-in-original. Aggrieved, the respondent had appealed to the Commissioner (Appeals) who, by the impugned order, observed that the courts have repeatedly held that this kind of activity was not chargeable to service tax and therefore set aside the order-in-original. He placed reliance on the following decisions :-

(a) Infrastructure Leasing & Financial Services Ltd. versus CST MANU/CM/0453/2014 : 2015 (37) S.T.R. 487 (Tri. - Mum.);

(b) Sterlite Industries versus CCE MANU/CC/0239/2013 : 2014 (35) S.T.R. 849 (Tri. - Mum.);

(c) Sports Club of Gujarat Ltd. versus Union of India MANU/GJ/0907/2009 : 2010 (20) S.T.R. 17 (Guj.);

(d) CCE versus Jabalpur Motors Ltd. MANU/CE/0500/2014 : 2014 (36) S.T.R. 1160 (Tri. - Del.)

4. We have heard learned authorized representative for the Department and learned consultant for the respondent and perused the records.

5. On behalf of the Revenue, learned authorized representative for the Department reiterated the following grounds of appeal and prayed the impugned order may be set aside as it was not legal and proper and the order of the Additional Commissioner may be restored for the following reasons :

(a) The Tribunal held that in the following extended corporate guarantees would fall under Section 65 (12) of the Finance Act, 1994 i.e. under Banking & financial Services.

(i) Kaveri Agricare versus CST, Mysore MANU/CB/0379/2010 : 2011 (22) S.T.R. 220 (Tri. - Bang.);

(ii) Olam Agro versus CST, Delhi - I MANU/CE/0611/2013 : 2014 (33) S.T.R. 251 (Tri. - Del.)

(b) the consideration received by one entity for providing corporate guarantee to the other is classifiable unde........