2026-VIL-978-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax – Taxability of Corporate Guarantee without consideration - Levy of service tax on Corporate Guarantee at an arbitrary rate of 3.5 percent on the amount of guarantee, without any consideration being charged by the appellant - Whether the provision of Corporate guarantee by a company to its associated enterprises, without charging any commission, interest, or fees, constitutes a taxable service under the Finance Act, 1994 and leviable to service tax – HELD - The provision of corporate guarantee without consideration does not constitute a taxable service. The definition of service under Section 65B(44) of the Finance Act, 1994 mandates that an activity must be carried out by a person for another for consideration to qualify as a taxable service - In the present case, the SCN itself acknowledges that no commission, interest, or fees were charged by the appellant for providing the corporate guarantee. The appellant is neither a banking company nor a financial institution, and the activity of providing guarantee without any consideration does not fall within the definition of banking and other financial services - The reliance on non-monetary benefits cannot extend to ascertainment of service as such benefits are relevant only for determining assessable value, not for determining whether a service exists. Since no consideration flows from the beneficiary to the guarantor, the essential element required to constitute a taxable service is absent - The demand for service tax on corporate guarantee is quashed and the appeal is allowed
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