Corporate guarantee without consideration is not a taxable service where no contrary factual distinction is shown.

Service tax was claimed on a corporate guarantee extended to banks for credit facilities used by group companies on the theory that it was comparable to a bank guarantee and fell within taxable service. The Tribunal noted that the Supreme Court had already held that a corporate guarantee issued to group companies without consideration is not shown to be a taxable service, and it applied its own earlier order following that ruling. As the facts were found to be identical and no contrary factual distinction or taxable value was demonstrated, the demand was held unsustainable and the impugned order was set aside.

---

---

Issues: Whether service tax could be levied on the corporate guarantee extended by the appellant to banks for credit facilities availed by its group companies.

Analysis: The demand was founded on the premise that a corporate guarantee was akin to a bank guarantee and constituted a taxable service under Section 65B(44) of the Finance Act, 1994. The Tribunal noted that the Supreme Court had already settled the issue by holding that, where no consideration was received for issuing a corporate guarantee to group companies, such issuance was not shown to be a taxable service. The Tribunal also followed its own earlier final order applying the same Supreme Court ruling and found the facts of the present case to be identical.

Conclusion: The demand was held unsustainable and the impugned order was set aside, in favour of the assessee.

Ratio Decidendi: Corporate guarantee issued to group companies without consideration is not taxable as a service in the absence of a demonstrable taxable value or contrary factual distinction.

---