CESTAT analyzed the agreement between the parties and determined...

CESTAT analyzed the agreement between the parties and determined that the transaction did not constitute a franchise service under Section 65(47) of the Finance Act, 1994. The tribunal found the relationship was purely commercial, involving a buyer-seller interaction without representational rights. The agreement was non-exclusive, with Microsoft providing software and hardware on a non-exclusive basis. Critically, the transaction did not meet franchise service criteria, and therefore the respondent was not liable for service tax under the reverse charge mechanism. The Revenue's appeal was consequently dismissed, affirming the original order's validity.

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