Corporate guarantees without consideration are not taxable services, so reverse charge service tax demand could not survive.

Service tax under reverse charge could not be levied on corporate guarantees issued by an overseas parent company where no consideration was paid. CESTAT held that a service rendered without consideration does not amount to a taxable service, and the record did not establish any payment by the assessee for the guarantees. In the absence of consideration, the Revenue had no basis to sustain the demand. The tax demand was therefore unsustainable, and the connected penalty and interest consequences also did not survive.

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Issues: Whether service tax was payable under reverse charge mechanism on corporate guarantees issued by the overseas parent company to secure loans obtained by the assessee, when no consideration was paid for such guarantees.

Analysis: The Tribunal followed the binding principle that a service rendered without consideration does not constitute a taxable service. It noted that the assessee had not paid any consideration to the overseas parent company for the corporate guarantees, and the record in the show cause notice as well as the impugned orders did not establish any such payment. In the absence of consideration, the Revenue had no basis to sustain the demand.

Conclusion: The demand of service tax on the corporate guarantees was unsustainable and the impugned orders were liable to be set aside in favour of the assessee.

Final Conclusion: The appeals succeeded and the tax demand, together with the connected penalty and interest consequences, did not survive.

Ratio Decidendi: A corporate guarantee provided without consideration is not a taxable service, and service tax cannot be levied under reverse charge in the absence of payment for the alleged service.

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