Appellant not liable for service tax on corporate guarantees pre & post 01.07.2012. Penalty set aside for non-payment of service tax on flat owners' charges.

The Tribunal held that the appellant is not liable to pay service tax on corporate guarantees provided before or after 01.07.2012 as they did not receive any consideration for the guarantees. The penalty imposed on the appellant for non-payment of service tax on charges collected from flat owners was set aside as the appellant had already paid the tax along with interest before the show cause notice was issued. The appeal was allowed with consequential relief, clarifying the liability of service tax on corporate guarantees and penalties for non-payment of specific charges.

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Issues:
1. Liability of service tax on corporate guarantee provided by the appellant.
2. Imposition of penalty for non-payment of service tax on preferential location charges recovered from flat owners.

Analysis:
1. The appellant contested the service tax demand imposed on them for providing corporate guarantees to financial institutions on behalf of their associates. The Revenue alleged the activity falls under Banking and Finance Institution Services. However, the appellant argued they did not receive any consideration for providing the guarantees. The Tribunal noted that no evidence was presented by the Revenue to support the assumption that associates received loan facilities at lower rates, making the differential interest amount a consideration. Consequently, the Tribunal held that since the appellant did not receive any consideration, they are not liable to pay service tax on corporate guarantees provided before or after 01.07.2012.

2. Regarding the charges collected from flat owners for preferential location and other relevant charges, the appellant had already paid the service tax along with interest before the show cause notice was issued. The Tribunal observed that as per Section 73(3) of the act, proceedings were not required to be initiated against the appellant in such a scenario. Therefore, the penalty imposed on the appellant for non-payment of service tax on these charges was set aside. The impugned order was consequently set aside, and the appeal was allowed with consequential relief.

This judgment clarifies the liability of service tax on corporate guarantees and the applicability of penalties for non-payment of service tax on specific charges, providing a clear legal interpretation in favor of the appellant based on the lack of consideration received and timely payment of service tax in the second scenario.

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