Service Tax
TRT-2025-
Cestat Ahmedabad
Date:-05-04-24
In:-
Issue Favourable to Tax Payer ?:-
Order Date – 05 April 2024
Parties: M/s Essar Power Ltd Vs C.C.E. & S.T.-Surat-i
Facts –
- The Appellant, M/s Essar Power Ltd, is a limited company and is primarily engaged in the generation of electricity. The appellant executed two corporate guarantees dated 10.01.2008 and07.01.2010 on behalf of Loop Telecom Pvt. Ltd and Loop Mobile Holdings India Ltd. for securing loans, in favour of State Bank of India.
- The appellant was issued show cause notice based on an investigation undertaken by DGCEI, Ahmedabad zonal unit demanding service tax on the Guarantee Commission received by the Appellant by classifying it under the head of Business Support Services. The demand has been confirmed.
Issue –
- Whether service tax is liable to be discharged on the Guarantee Commission received for furnishing Corporate Guarantee under the heading “business support services‟?
Order –
- The Tribunal observed that the execution of Corporate Guarantee by the Appellant is merely an act of providing an instrument for securing loans and not even fundamentally connected to the services as described under Business Support services which includes those services to the tune of transaction processing, routine administration or accountancy, customer relationship management and tele-marketing which in its nature of extension includes those that are outsourced only to be interpreted within its scope for the purpose of levy of tax.
- Therefore, no merit can be found that the commission so received on such corporate guarantee by the Appellant will become eligible for taxation under the scope of Section 65 (104c) of the Finance Act, 1994. Hence the appeal is allowed.
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