Order Date – 17 March 2023

Parties: Commissioner of CGST and Central Excise Vs M/s Edelweiss Financial Services Ltd.

Facts –

• The Respondent, M/s Edelweiss Financial Services Ltd., have provided ‘corporate guarantee’ on behalf of its subsidiaries located within and outside India without discharging tax liability. 
• The adjudicating authority had concluded that receipt of commission from overseas companies, being consideration for export of services, was not taxable and that, insofar as domestic facilitation was concerned, the definition in section 65(12) of Finance Act, 1994 did not extend to ‘corporate guarantee’ which, unlike ‘bank guarantee’, finds no specific enumeration as ‘other financial services’ therein, till 20th June 2012 and that for the period thereafter, absence of ‘consideration’ for facilitating ‘corporate guarantee’ excluded such activity from coverage within the definition of ‘service’ in section 65B(44) of Finance Act, 1994.
• The Revenue submits that ‘corporate guarantee’ is not dissimilar to ‘bank guarantee’ and, thereby, liable to tax in like manner.

Issue –

• Whether Service tax is leviable on corporate guarantee?

Order –

• The Court observed that even if ‘corporate guarantee’ is, in practice, akin to ‘bank guarantee’, the definition of ‘banking and other financial services’ in section 65(12) of Finance Act, 1994 amplifies ‘other financial services’ with specific enumeration without including ‘corporate guarantee’ therein. The legislative intent to exclude ‘corporate guarantees’ is, thus, unarguable. 
• For the period after the negative list, taxation has been rightly construed by the adjudicating authority. Any activity must, for the purpose of taxability under Finance Act, 1994, not only, in relation to another, reveal a ‘provider’, but also the flow of ‘consideration’ for rendering of the service. In the absence of any of these two elements, taxability under section 66B of Finance Act, 1994 will not arise. It is clear that there is no consideration insofar as ‘corporate guarantee’ issued by respondent on behalf of their subsidiary companies is concerned. 
• The appeals were dismissed.