The assessee provided corporate guarantees to banks/financial institutions lending to subsidiary/related companies. There was no consideration. The revenue alleged that they have provided “banking or financial services” as a corporate guarantee, which is like a bank guarantee. For the period post-July 2012, it was alleged that it is a “service” under section 65B(44) of the Finance Act. The demand of over Rs. 97 crores was proposed along with interest and penalties. The commissioner dropped the proceedings, holding that there is no consideration and valuation rules cannot be resorted to, and hence, bank charges for bank guarantees cannot be deemed consideration.
The Revenue filed an appeal before CESTAT, Mumbai. The CESTAT dismissed the appeal filed by the department.
The Revenue filed an appeal before the Supreme Court. It was argued that similar matter in the case of DLF has been admitted. However, the court dismissed the appeal filed by the department.
It was observed that there is a concurrent finding of fact that there is no consideration, and no evidence has been led by the department to prove otherwise. Referring to section 65B(44) of the Finance Act, it was held that there had to be valuable consideration for a service to be taxable.
Commr. of CGST & CE vs. M/s Edelweiss Financial Services Ltd.—CA No. 1769 of 2023 (SC)
