Case Law Details
Sterlite Industries India Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
CESTAT Chennai has held that commission received/paid for issuance of corporate guarantee to associate/subsidiary companies is not exigible to service tax under Section 65(12)(a)(ix) of Finance Act, 1994. The Tribunal observed that corporate guarantee is not same as bank guarantee since corporate guarantee is an in-house guarantee issued to safeguard financial health of associate enterprises and is not issued to customers generally. It was also held that only the services listed in Section 65(12)(a)(ix) ibid would be exigible to service tax under Banking and Other Financial Services. The Tribunal in this regard also observed that it was also not the case that the corporate guarantee was issued / procured to enable the bank to issue bank guarantee.
FULL TEXT OF THE CESTAT JUDGEMENT
The appellants are inter alia manufacturers of copper products falling under Chapter 74 of CETA, 1985. Pursuant to audit scrutiny by department officers, it emerged that appellants had received guarantee commission from their associate / subsidiary companies for providing corporate guarantee. It was further noticed that appellants have also paid consideration to M/s. Vedanta Resources Plc. Inc. London (herein after referred to as Vedanta) during the year 2008 – 09 for getting corporate guarantee to secure external commercial loans. Department took the view that the amount so received / paid by the appellant from / to their associate / subsidiary companies for providing corporate guarantee for a consideration would be exigible to service tax under the category of “Banking and Other Financial Services” (BOFS). In consequent, three show cause notices were issued to the appellants as under:-
