Commissioner,CGST Delhi South vs. M/S Hindustan Power Projects PVT LTD

Facts

The Commissioner of CGST, Delhi South, filed two appeals (SERTA 14/2024 and SERTA 15/2024) against a judgment of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) dated September 26, 2023. The respondent is M/s Hindustan Power Projects Pvt Ltd. The appeals concern the taxability of corporate guarantees issued by the respondent to its group companies. The respondent did not appear before the High Court. The High Court noted that the issue had been conclusively answered by the Supreme Court in Commissioner of CGST and Central Excise vs. Edelweiss Financial Services Ltd.

Held

The High Court held that the issue of whether corporate guarantees issued to group companies without consideration are taxable services has been conclusively answered by the Supreme Court in Commissioner of CGST and Central Excise vs. Edelweiss Financial Services Ltd. The Supreme Court in Edelweiss had found that for a service to be taxable under the Finance Act, 1994, there must be a flow of consideration. The CESTAT and the Commissioner had both found that the respondent had not received any consideration for the corporate guarantees issued to its group companies. The Revenue had not demonstrated that the factual matrix of the present case was identical to the pending Supreme Court case. Therefore, the High Court found no justification to interfere with the CESTAT's order and dismissed the appeals.

Key Issues

1. Whether the issuance of corporate guarantees by a company to its group companies without consideration constitutes a taxable service under the Finance Act, 1994? The Appellant (Commissioner CGST) argued that the matter should be admitted and tagged with a pending Supreme Court case (Civil Appeal No. 428/2020 @ Diary No. 42703/2019), implying that there is a debatable issue regarding the taxability of such guarantees. The Appellant sought to challenge the CESTAT's order. The Respondent (M/s Hindustan Power Projects Pvt Ltd) argued, as recorded in the Supreme Court judgment in Edelweiss, that the issuance of corporate guarantees to a group company without consideration does not fall within the definition of taxable service. They relied on Section 65(12) and Section 65B(44) of the Finance Act, 1994, emphasizing that a service must be rendered for valuable consideration to be taxable. They also referred to the findings of the Commissioner and the Tribunal which noted that the department had failed to prove any monetary or non-monetary consideration received by the assessee for the corporate guarantees.