Corporate guarantee commission not taxable under business support services Section 65(104c) Finance Act 1994

CESTAT Ahmedabad held that guarantee commission received for furnishing corporate guarantee does not fall under business support services for service tax purposes. The tribunal ruled that executing corporate guarantee is merely providing a loan security instrument, not fundamentally connected to business support services like transaction processing or customer relationship management under Section 65(104c) of Finance Act 1994. The extended limitation period was deemed invalid as the appellant had not suppressed facts with intent to evade tax, having transparently responded to departmental queries post-audit. The impugned order was set aside and appeal allowed.

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Issues involved:
The issues involved in the present appeal are:
1. Whether service tax is liable on Guarantee Commission under 'business support services'Rs.
2. Whether the Department correctly invoked an extended period of limitation against the AppellantRs.

Issue 1:
The Appellant, engaged in electricity generation, provided Corporate Guarantees for loans. The Department demanded service tax on Guarantee Commission, classifying it under Business Support Services. The Appellant argued that their services do not fit the definition of Business Support Services as per TRU circular and case laws cited. The Tribunal analyzed the definition of 'Support Services of Business or Commerce' and held that Corporate Guarantee does not fall under Business Support Services. The Tribunal referred to a relevant case law to support its decision.

Issue 2:
Regarding the extended period of limitation, the Appellant contended that they believed in good faith they were not liable for service tax on Guarantee Commission. They highlighted that no adverse treatment was faced post-audit in 2009. The Tribunal agreed with the Appellant, stating that the show cause notice invoking the extended period cannot be sustained. The Appellant succeeded on the limitation issue.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief.

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