Corporate guarantee without consideration is not a taxable service under the Finance Act, so service tax cannot be levied.

Furnishing a corporate guarantee for group companies without any monetary consideration, commission, fee or charges does not amount to a taxable service under section 65B(44) of the Finance Act, 1994. The post-negative list regime requires both a service provider and consideration, and in the absence of consideration the activity falls outside the statutory definition of service. Accordingly, service tax is not leviable under section 66B on such guarantees, and the demand is unsustainable.

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Issues: Whether furnishing of a corporate guarantee for group companies without any consideration constitutes a taxable service under section 65B(44) of the Finance Act, 1994 and attracts service tax under section 66B of the Finance Act, 1994.

Analysis: The corporate guarantee was furnished without any monetary consideration, commission, fee or charges, and this absence of consideration was admitted in the show cause notice and the order-in-original. Taxability under the post-negative list regime requires both a provider and consideration for the activity; in the absence of consideration, the activity does not satisfy the definition of service. The issue was already settled by binding precedent holding that no service tax is leviable on corporate guarantees issued without consideration to group companies.

Conclusion: The furnishing of a corporate guarantee without consideration is not a taxable service and no service tax is payable on that account; the demand is unsustainable.

Ratio Decidendi: Consideration is an essential element of a taxable service under section 65B(44) of the Finance Act, 1994, and in its absence, service tax cannot be levied under section 66B of the Finance Act, 1994.

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