2015 (8) TMI 642 - AT - Service Tax

Tribunal Overturns Service Tax Demands & Penalty, Emphasizes Proper Legal Interpretation

The Tribunal allowed the appeal, setting aside the service tax demand under the franchise service category and the confirmation of service tax credit ... Franchise service - Nature of Receipt of course fees - Invocation of extended period of limitation - Held that:- Authorisation Agreement, under Para 10 Schedule of Fees provides for Authorisation fee and course fees separately and distinctly. Only because all the fees are provided in one Agreement does not necessarily lead to a conclusion that the different components of fees are only for the purpose of grant of franchise. Their very names suggest differently. Under Para 10B, the Authorisation fees is for grant of authorisation for conduct of training at the sites of authorisation training centres as approved under the Agreement. The authorisation fee is paid at the time of signing of the Authorisation Agreement. On these fees the appellant have paid service tax under the category of franchise service. - whole activity is only to impart high standard training. Even clause (iii) of the definition of franchise is not met because the fees is not paid by the training centre to the appellant. Rather the fees collected from the students comes into the account of the appellant who then pay 75% of theshare to the training centre. In this view of the matter, the activity clearly falls outside the scope of the franchise service. No justification for invoking the extended time period as the appellant are an advanced research and development centre under the Ministry of Science and technology and will not indulge in any mis-statement or suppression with an intention to evade duty. - Decision on the cases of assessee's own previous case [2008 (10) TMI 148 - CESTAT BANGLORE] and [2002 (2) TMI 105 - SUPREME COURT OF INDIA] followed - Decided in favour of assessee. Issues:1. Upholding of service tax demand under franchise service category.2. Confirmation of service tax credit demand under CENVAT Credit Rules, 2004.3. Equivalence penalty confirmation under Section 78 of the Finance Act, 1994.4. Interest leviable under Section 75.Issue 1: Upholding of Service Tax Demand under Franchise Service Category:The judgment addressed the appeal against the Commissioner (Appeals) order upholding a service tax demand of Rs. 32,14,844 for the period 01.07.2003 to 30.09.2004 under the franchise service category. The appellant, a scientific society, entered into Authorisation Agreements with authorised computer education training centres (ACETC) for training activities. The Revenue contended that the appellant did not include their share of course fees in the taxable value while discharging service tax liability under the franchise service category. The appellant argued that their activity did not fall under the franchise service definition and cited relevant circulars and notifications to support their position. The Tribunal found that the course fees were paid by students for training and shared between the appellant and training centers, not towards franchise services. The Tribunal concluded that the activity fell outside the scope of franchise service as the agreement reflected a joint business activity rather than a franchise relationship.Issue 2: Confirmation of Service Tax Credit Demand under CENVAT Credit Rules, 2004:Another issue involved the confirmation of service tax credit amounting to Rs. 2,79,463 demanded under Rule 14 of CENVAT Credit Rules, 2004. The appellant argued that they had availed the CENVAT credit within the permissible limits and produced evidence to support their claim. The Tribunal noted discrepancies in the adjudication order regarding the availability of CENVAT credit balance and found that the appellant had indeed taken and utilized the credit during the relevant period. The Tribunal rejected the denial of CENVAT credit and set aside the demand on this count.Issue 3: Equivalence Penalty Confirmation under Section 78 of the Finance Act, 1994:The judgment also addressed the confirmation of an equivalent penalty under Section 78 of the Finance Act, 1994. The appellant challenged the imposition of the penalty, arguing against its applicability based on their status as a research and development center under the Ministry of Science and Technology. The Tribunal found no justification for invoking the penalty, considering the appellant's genuine belief and advanced research activities. As a result, the penalty was set aside.Issue 4: Interest Leviable under Section 75:Additionally, interest leviable under Section 75 was confirmed in the impugned order. However, the judgment did not provide specific details or arguments related to this issue.In conclusion, the Tribunal allowed the appeal, setting aside the impugned order based on the analysis and findings related to the service tax demand under the franchise service category and the confirmation of service tax credit demand under CENVAT Credit Rules, 2004. The Tribunal also addressed the equivalence penalty under Section 78, setting it aside due to the appellant's status and activities. The judgment highlighted the importance of proper interpretation of legal provisions and factual circumstances in tax-related matters, emphasizing the need for clarity and consistency in decision-making.