TaxTMI 
TaxTMI 
2024 (2) TMI 967
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....the Finance Act, 1994, in respect of the demand of service tax dropped in the adjudication proceedings. The assessee-appellants have also filed a Cross Objection in Appeal No. ST/88412/2018 in the above case. All these appeals are taken together for disposal by this Tribunal. 2.1. Briefly stated, the facts of the case are that the assessee-appellants herein are inter alia, engaged in the business of stock broking i.e., purchase and sale of securities for the client and other related services. For providing taxable services of 'Banking and Other Financial Services', the assessee-appellants are registered with the service tax department and were filing periodical returns. The assessee-appellants have various subsidiaries, which are running independent businesses and have been paying service tax, wherever applicable. The subsidiaries avail fund-based and non-fund based credit facility from banks. The assessee-appellants provide corporate guarantees to banks for the purpose of sanctioning credit facility to the subsidiary companies. As per RBI Guidelines, the assessee-appellants cannot charge any amount to the subsidiary company for the purpose of providing corporate guarantees to ban....
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....tten submissions vide letter dated 16.12.2015 and after providing opportunity for personal hearing to the assessee-appellants on 17.01.2018, the learned Commissioner adjudicated the case by dropping the demand of service tax in respect of providing bank guarantees and by confirming the demand of service tax on tolerating the act of delay in payment and refraining from not selling of the shares, by treating the same as an activity which is different and distinct from share broking under Section 73(2) ibid along with interest, besides imposition of mandatory penalty under Section 78 ibid. Being aggrieved against the impugned order both the assessee-appellants and the Department have filed these appeals before this Tribunal. 3. Heard both sides and examined the case records along with the written paper books submitted by both the parties. 4.1 The Show Cause Notice dated 17.10.2015 was issued based on the results of investigation conducted by the department. In respect of the demand of service tax on provision of bank guarantee to their subsidiaries, it is claimed by the Department that the assessee-appellants have failed to classify the services provided by them and there was a fail....
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....y the said Committee that this vital aspect has been ignored by the Commissioner in the impugned order and thus the act of providing corporate guarantee to the subsidiaries by the assessee-appellants is liable to service tax under the taxable category 'banking and other financial services'. 5.1 From the facts of the case, we find that the department had accepted that the assessee-appellants had not charged any commission/fees to the overseas subsidiary companies as well as to the subsidiary companies situated in India for issuance of the corporate guarantee. However, the service tax demand was proposed on the basis of commissions usually charged by the commercial banks for providing bank guarantee. Further, we also find that the assessee-appellants did not charge any consideration for providing the corporate guarantees as stated in the SCN and as noted by the learned Commissioner in the impugned order. Insofar as levy of service tax is concerned, the same should be on the amount of consideration received for provision of such service. Thus, prima facie it appears that there is no element of service inasmuch as there is no consideration involved in providing corporate guarantee by ....
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....tion of the observation therein detracts from its employability to advance the case of Revenue. The decision of the Tribunal in re Neyveli Lignite Corporation Ltd deals with an entirely different set of facts and the explanation therein of 'guarantee', as commonly understood, for placing that dispute in a context is of no assistance here. 8. The criticality of 'consideration' for determination of service, as defined in section 65B(44) of Finance Act, 1994, for the disputed period after introduction of 'negative list' regime of taxation has been rightly construed by the adjudicating authority. Any activity must, for the purpose of taxability under Finance Act, 1994, not only, in relation to another, reveal a 'provider', but also the flow of 'consideration' for rendering of the service. In the absence of any of these two elements, taxability under section 66B of Finance Act, 1994 will not arise. It is clear that there is no consideration insofar as 'corporate guarantee' issued by respondent on behalf of their subsidiary companies is concerned. 9. The reliance placed by Learned Authorised Representative on the 'nonmonetary benefits' which may, if at all, be of relevance for dete....
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.... charges, we find that the learned Commissioner has dismissed the contention of the assessee-appellants that only the service of stock broking is provided by them, and held that service of stock broking ends with buying/selling of shares; tolerating the act of delay in payment and refraining from not selling off the shares is an activity different and distinct from share broking. Hence he confirmed the adjudged demands in respect of such services along with interest and imposed penalties under section 78 (1) ibid. 7.2 We find that the above issue has been examined by the CBIC at length and necessary instructions have been issued to the field formations vide Circular dated 28.02.2023. Accordingly, the field formations were directed to follow the guidelines discussed in the said circular and jurisprudence that has evolved over time, in determining whether service tax is payable in respect of taxable services under the category "Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act". The relevant paragraphs of the said instructions of CBIC is extracted below: "CIRCULAR NO. 214/1/2023-SERVICE TAX [F.NO. CBIC- 110267/14/2023-CX-VIII ....
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.... to abstain from doing something) and the consideration. 5. The issue also came up in the CESTAT in Appeal No. ST/ 50080 of 2019 in the case of M/s Dy. GM (Finance) Bharat Heavy Electricals Ltd in which the Hon'ble Tribunal relied on the judgement of divisional bench in case of M/s South Eastern Coal Fields Ltd Vs. CCE Raipur {2021(55) G.S.T.L 549(Tri-Del)}. Board has decided not to file appeal against the CESTAT order ST/A/50879/2022-CU[DB], dated 20.09.2022 in this case and also against Order A/85713/2022, dated 12-8-2022 in case of M/s Western Coalfields Ltd. Further, Board has decided not to pursue the Civil Appeals filed before the Apex Court in M/s South Eastern Coalfields Ltd. supra (CA No. 2372/2021), M/s Paradip Port Trust (Dy. No. 24419/2022, dated 8-8- 2022), and M/s Neyveli Lignite Corporation Ltd. (CA No. 0051-0053/2022) on this ground. 6. In view of above, it is clarified that the activities contemplated under section 66E i.e. when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are the activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity.....
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....f any stockbroking services being provided by the appellants. In terms of clause 45 of the agreement entered by the appellants with investors, - "any amount overdue towards trading or any other reason will be charged with delayed payment charges". Perusal of the said clause reveals that the DPCs are collected only in case of overdue payments. The reasoning of the Commissioner that the origin of the DPC has taken place on account of business or service of sale/purchase of securities by a stockbroker and the same has to be considered as a part of the service does not appeal to us, for the simple reason that such DPC collection has got nothing to do with the sale/purchase of the securities, a service which the appellants is rendering as a stock-broker but admittedly is a charge recovered from only those customers, who delayed the payments of the securities value and is in fact is a penal interest, for compensating the assessee for the payments already made by them, to the Exchange, on behalf of their clients. xx xx xx xx xx 11. As is seen from the above, the mandate of Section 67 of the Act is that it is only the commission/brokerage, which is liable to Service Tax and no oth....
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.... the payment within stipulated time. Such amounts are not includible in the taxable value for charging Service Tax. This principle will also apply to other service providers. 3. However, Section 67 of the Finance Act, 1994 provides that Service Tax is chargeable on taxable value which shall be the 'gross amount charged' by the service provider. Therefore, if in the account statement/invoice/bill, etc. issued by the service provider, only the gross amount is shown without indicating the delayed payment charges separately, the Service Tax would be payable on the entire amount. Delayed payment charges would not be includible in the 'gross value charged' only if these charges are shown separately in the account statement/invoice/bill etc." As is seen from the above, the DPCs recovered separately and shown separately in the invoices/bills cannot be held liable to payment of Service Tax. Admittedly, in the present case, such DPCs were being recovered by the appellants by issuing separate debit notes to their customers and by debiting the amounts in their running ledgers. As such, the clarification issued by the Board is fully applicable to the facts of the present case. xx xx xx....