Case Law Details
Olam Agro India Ltd. Vs C.C.E (CESTAT Delhi)
A corporate guarantee is used when a corporation agrees to be held responsible for completing the duties and obligations of debtor to a lender, in case the debtor fails to comply with the terms of the debtor- lender contract. Whereas a bank guarantee is a promise from a bank that the liability of the debtor will be met in the event the debtor fails to favour his contractual obligations. Therefore, the nature of corporate guarantee as well as of bank guarantee is one and the same i.e. for facilitation of the lending facilities. It was noticed that M/s Olam Agro India Ltd, Singapore, the parent company has executed corporate bank guarantee in favour of banks in India for facilitation of lending of funds to the appellant and in lieu of the said guarantee the appellant paid 1 per cent of value of guarantee as commission to their parent company at Singapore by way of foreign exchange remittance and their parent company provided them debit notes on quarterly basis. The copies of the said debit notes clearly indicate the transactions with regard to lending facilities in India and therefore through Corporate Guarantee Commission the appellant are chargeable to Service Tax. And the commission paid was taxable under ‘Business Auxiliary Service’. Merely because the name of the guarantee has been changed from ‘Bank’ to ‘Corporate’ it cannot be said that it won’t fall under ‘Business Auxiliary Service’ as defined under Section 65 (105) of the Finance Act, 1994.
FULL TEXT OF THE CESTAT JUDGMENT
1. The present appeals are against the Orders-in-Original No. 18- 19/2012-13 dated 31/01/2013 and 52/2012-13 dated 06/03/2013.
2. The brief facts of the case are that the appellant are engaged in agri-business and is a major exporter of agricultural products such as cocoa beans, rice, sesame seeds, cotton etc. The lower Authorities have ordered payment of Service Tax in respect of the following two commissions:-
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