Custom, Excise & Service Tax Tribunal
D B Realty Ltd vs Commissioner Central Goods And Service ... on 9 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH
Service Tax Appeal No. 85920 of 2020
(Arising out of Order-in-Original No. 79-80/MVSC/Pr.COMMR/ME/2019-20 dated
24.12.2019 passed by the Principal Commissioner of GST & CX, Mumbai East.)
M/s. D B Realty Ltd. ........Appellant
DB House, Yeshodham,
Goregaon (East),
Mumbai - 400 068
VERSUS
Principal Commissioner of GST & CX, ........Respondent
Mumbai East 9th Floor, Lotus Info Centre, Near Parel Railway Station, Parel East, Mumbai - 400 012 APPERANCE:
Shri Ramnath Prabhu, Advocate for the Appellant Dr. Badhe Piyush Barasu, Dy. Commr., Authorised Representative for the Respondent CORAM:
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) HON'BLE MR. ANIL G. SHAKKARWAR, MEMBER (TECHNICAL) FINAL ORDER NO. 85665/2024 Date of Hearing: 07.06.2024 Date of Decision: 09.07.2024 PER: DR. SUVENDU KUMAR PATI Confirmation of Service Tax demand of ₹56,05,40,379/- for the period between 01.04.2011 to 30.06.2017 raised through two show- cause notices (SCN) alongwith interest and penalty thereon by the Principal Commissioner of GST & CX, Mumbai East on the ground that Appellant had provided corporate guarantees to overseas entities is assailed in this appeal.
ST/85920/2020 2
2. Facts of the case, in a nutshell, is that Appellant is engaged in construction of residential properties and it had issued corporate guarantees in favour of its subsidiaries to various banks and financial institutions without any commission/fee/brokerage or any other form of consideration. Holding the said guarantee to be a taxable service under the head "banking & other financial services" falling under Section 65(105)(zm) of the Finance Act, 1994 for the period up to 30.06.2012 and for the period from 01.07.2012 as leviable to Service Tax since not covered under exempted service or negative list, Department raised the above referred demand vide show-cause notice dated 21.10.2016 and 16.04.2019 were issued to it. Matter was adjudicated and demand alongwith interest and penalty were confirmed, which is assailed before this Tribunal.
3. During course of hearing of the appeal learned Counsel for the Appellant Mr. Ramnath Prabhu submitted that the impugned order confirmed the demand of Service Tax on corporate guarantees given on behalf of overseas entities which is outside the scope of Service Tax levy since place of provision of service would be outside India in terms of Rule-3 of the place of provision of Services Rules, 2012 and hence not chargeable to Service Tax under Section 66B of the Finance Act, 1994. He further submitted that otherwise also, the issue is squarely covered by decision of this Tribunal passed in several cases including those decided by this Tribunal in the case of DLF Cyber City Developers Ltd. as reported in 2019 (28) GSTL 478 (Tri.- Chan.), M/s. IIFL Holding Ltd. as reported in 2024 (2) TMI 967 ST/85920/2020 3
- CESTAT Mumbai, M/s. Pharmax Corporation Ltd. as reported in 2024 (3) TMI 1179 - CESTAT NEW DELHI, Edelweiss Financial Services Ltd. as reported in 2023 5 Centax 57 (Tri.-Bom) that has been affirmed by the Hon'ble Supreme Court as reported in 2023 (73) GSTL 4 (SC), wherein it was stated that in the absence of any consideration, activity of corporate guarantees does not qualify to be a 'service' under Section 65B(44) of the Finance Act, 1994, for which the order passed by the Commissioner is unsustainable both in law and facts. He took us to para 9 of the show-cause notice and para 29 of the Order-in-Original to justify that such corporate guarantees to overseas entities were given without consideration, for which the order passed by the Commissioner is required to be set aside.
4. Learned Authorised Representative for the Respondent- Department Mr. Badhe Piyush Barasu argued in support of the reasoning and rationality of the order passed by the Principal Commissioner.
5. We have gone through the case record and the synopsis submitted on behalf of the Appellant. As could be noticed from para 3 of the synopsis and para 4.13 to 4.15 of the subject show-cause notice, "consideration" was taken as notional income arrived by applying the Income Tax "transfer price regulations" and computing 4% commission on it, as applied in case of bank guarantees by nationalised bank, on the said notional income supposed to have been received under transfer pricing of Income Tax Act, 1961 but ST/85920/2020 4 neither side have presented this fact before this Tribunal, except a noting is available in the synopsis and a judgment on Ultratech Cement Ltd. as reported in 2023 (10) TMI 1363 -CESTAT MUMBAI is cited on non-acceptance of such transfer pricing method of calculation. However on careful perusal of the said judgment it is observed that in Ultratech Cement Ltd., there was a demand made by the Income Tax Department for payment of Income Tax under 'transfer pricing against issue of corporate guarantees to overseas companies' but that assessment order passed by the Income Tax Officer was set aside by the Commissioner of Income Tax (Appeals) with a direction for deletion of those additions from the income of the Appellant, holding that no guarantee fee was actually charged on the concerned loan and therefore, the demand raised by the Service Tax Authority was set aside. In the instant case there was no such calculation even made by the Income Tax Authorities or by the Appellant to make a declaration on account of transfer pricing and even the show-cause notice as well as Order-in-Original clearly indicate that no form of consideration-neither monetary nor in any other method, had flown from the corporate guarantor namely the present Appellant to the banks in favour of overseas entities. This being the fact on record and having guided by the precedent decision of Hon'ble Supreme Court rendered on the issue, as noted above including in the case of Edelweiss Financial Services Ltd. and DLF Cyber City Developers Ltd. (supra) that corporate guarantees is not taxable to Service Tax without payment of consideration against such guarantee, the following order is passed.
ST/85920/2020 5 THE ORDER
6. The appeal is allowed and the order passed by the Principal Commissioner of GST & CX, Mumbai East vide Order-in-Original No. 79-80/MVSC/Pr.COMMR/ME/2019-20 dated 24.12.2019 is hereby set aside with consequential relief, if any.
(Order pronounced in the open court on 09.07.2024) (Dr. Suvendu Kumar Pati) Member (Judicial) (Anil G. Shakkarwar) Member (Technical) Prasad