Franchise fees not part of assessable value where receipts reflected services and brand-rights use, not sale consideration.

Franchise-related receipts were not includible in the assessable value of goods where the goods were sold to franchisees at the same price as to the assessee's own restaurants. The one-time technical assistance fee was for setting up and operational support services, and the monthly percentage fee was for continuing services and the right to use technical know-how and brand name. Because only consideration flowing from buyer to seller in connection with the sale can be added, and the record showed service tax was paid on these receipts as franchise-service consideration, they were not additional sale consideration. The demand and penalties were unsustainable.

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Issues: Whether the one-time technical assistance fee and the monthly fee collected from franchisees were includible in the assessable value of the goods as additional consideration for sale.

Analysis: The goods were sold to franchisees at the same price as to the assessee's own restaurants. Under the valuation scheme, only consideration flowing directly or indirectly from the buyer to the assessee in connection with the sale can be added to the transaction value. The agreement showed that the one-time fee was towards setting up and operational support services, and the monthly percentage fee was towards continuing services and the right to use technical know-how and brand name. The record also showed that service tax was paid on these receipts as franchise-service consideration. There was no finding that these receipts were unrelated to services or were inflated as disguised sale consideration.

Conclusion: The franchise-related receipts were not additional consideration for sale and could not be added to the assessable value. The demand and penalties were unsustainable.

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