2013 (3) TMI 409

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....services to their group companies. The services rendered are Management Consultancy Service, Export Agency Services, furnishing guarantee for subsidiaries, holding of investments, marketing and project services and for this purpose, the appellants had entered into agreements with their group companies. 2. The appellants were providing Corporate Guarantee for the facilities sanctioned by them to their subsidiaries who are charged an amount as 'Guarantee Commission' for the facilities availed and a percentage, which is charged as 'Commitment Charges' on the unavailed portion. However, the appellants discharged the service tax liability only on 'Guarantee Commission', and not on the 'Commitment charges' they received. Hence, the appellants ....

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....le to discharge service tax. (iii) that they are issuing corporate guarantee to Central Bank of India in connection with the limits extended by the Bank to various group companies of Simpson group. Since their funds are locked in, in case there is short utilization of the limits by any company, the said company is required to pay commitment charges. This by no stretch of imagination can be considered as guarantee commission for the purpose of service tax. (iv) that 'Guarantee commission' and 'commitment charges' are accounted as 'guarantee commission' only is totally erroneous. (v) that other financial services including lending, provisions of Bank Guarantee, etc., were added by Finance Act, 2006 with effect from 10-9-2004, the Boa....

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....ealized by them - (a) State Bank of India v. Commr. of Service Tax - 2006 (2) S.T.R. 204 (b) Inox Air Products v. C.C.E. - (2007) TIOL 1250 (c) Thermax Limited v. C.C.E. - 2007 (8) S.T.R. 487 4. A personal hearing was held on 17-11-2011, Shri V.S. Manoj, Advocate, appeared on behalf of the appellant and None represented the respondent-department. 4.1 During the hearing, the advocate, in addition to reiterating the submissions made already in the appeal memorandum, further submitted that since the commitment charge is not on account of any service provided by his client to the group company, the demand of Service tax on the said amount is not sustainable. He also invited my attention to earlier Order-in-Appeal Nos. 155/2009 (M....

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....provisions of Income-tax Act. It was defined as follows, vide Interest Act, 1974 before its repeal :- "Interest means interest on loans and advances made in India and includes - (a) commitment charges on unutilized portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include- (i) Interest referred to in sub-section (1B) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (ii) discount on treasury hills;" 5.4 Section 2(28A) of the Income-tax Act, 1961 defines "Interest" as under : "Interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, ....

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....imilar right or obligation" and further includes any service fee or other charge in respect of the moneys borrowed or debt incurred which would include deposit, claim or other similar right or obligation, as also in respect of any credit facility which has not been utilised. This statutory definition regards amounts, which may not otherwise be regarded as interest for the purpose of the statute. Even amounts payable in transactions where money has not been borrowed and debt has not been incurred are brought within the scope of the definition as in the case of a service fee paid in respect of a credit facility which has not been utilised. Even in cases where there is no relationship of debtor and credit or borrower and lender, if payment is ....