Case Law Details
UltraTech Cement Ltd. Vs Commissioner of CGST & CX (CESTAT Mumbai)
Introduction: In a significant legal development, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Mumbai has ruled in favor of UltraTech Cement Ltd. in a case against the Commissioner of CGST & CX (Central Goods and Services Tax & Central Excise). The case revolved around the taxation of corporate guarantees provided by UltraTech Cement without receiving any commission. This article provides an in-depth analysis of the case, the arguments presented, and the implications of the CESTAT Mumbai’s decision.
Detailed Analysis:
1. Background of the Case: UltraTech Cement Ltd. was engaged in the business of manufacturing various categories of cement and was also registered with the Service Tax department as an Input Service Distributor (ISD). During the disputed period, UltraTech Cement Ltd. had provided corporate guarantees to its wholly-owned subsidiary, Ultra Tech Cements Middle East Investments Limited (UCMEIL), as well as to other associate enterprises. These guarantees were given to lender banks to facilitate foreign currency loans for overseas acquisitions and capital commitments.
2. Taxation Dispute: The Service Tax department interpreted these transactions as a provision of bank guarantee, categorizing it as a taxable service under the Finance Act, 1994. They argued that UltraTech Cement Ltd. was liable to pay service tax under the taxable category of ‘banking and other financial services’ for providing these corporate guarantees. A show cause notice was issued, seeking to recover a substantial service tax demand from UltraTech Cement Ltd.
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