TaxTMI 
TaxTMI 
2013 (7) TMI 266
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.... made with CBUs through contract agreements. The arrangements provided for manufacture of branded alcoholic beverages by the CBUs with the condition that the same were supplied on sale to the specified distributors of the applicants. The agreement also provided for control of the bank account maintained in the name of the CBUs by the applicants and it was the responsibility of the applicants to provide the funds, know-how, details of raw materials and packaging materials etc. The surplus arising in the operating account of manufacture and sale which represents the profit in the business would go to the brand owner i.e. applicants. In the set of facts, the tax liability of the applicants was examined by the Anti Evasion section under 'Franchisee Service' and on the finding that manufacture and sale of branded beverages amounted to grant of representational right, therefore, a show-cause notice was issued for the period 1.7.2003 to 30.9.2006 for demand of Service Tax under the category of 'Franchise Service' and a small demand under the category of 'Management Consultant Service'. The show-cause notice was contested by the applicants but finally the demands of Service Tax were confir....
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....n'ble High Court of Bombay in the case of Indian National Shipowner's Association v. Union of India - 2009 (13) STR 235 (Bom.). Therefore, no service tax is payable by the appellants as service received from law firm in Sri Lanka, such services being in nature of 'legal services' not liable to service tax prior to introduction of taxing entry of 'Legal Consultancy Services' w.e.f. 1.9.2009. 5. On the other hand, Shri S. Dewalvar, Addl. Commissioner (A.R.) strongly opposed the contention of the learned Counsel and submitted that- The appellant are squarely covered under 'Franchise services' as defined under Section 65 (47) of the Finance Act, 1994. In this case, the basic allegation of the Department is that the business arrangements between M/s. DIAGEO India Pvt. Ltd. (DIAGEO for short) and alcohol manufacturers namely, M/s. AABL, M/s. KAMIPL and M/s. United Distilleries were in the nature of Franchise wherein the Franchisor namely, DIAGEO was liable for payment of service tax w.e.f. 1.7.2003. It will be my endeavour to examine the arrangements existing between the aforesaid entities in terms of parameters envisaged under the above....
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....cified one. Not only this, these raw materials shall not be used for any other products. This clause of the Agreement again makes KAM responsible for any loss or damage. In para 5.2 of the Agreement, it is stipulated that the equipment provided to KAM will be solely used for manufacturing products of DIAGEO. In terms of Para 9 of the Agreement, Quality Assurance has to be as per approved plan by M/s. DIAGEO whether it is a raw material or the finished products. Even the equipment for quality check in terms of para 9.4 of the Agreement shall be provided by DIAGEO. Hence it was concluded in the para 29(iv) of the OIO that DIAGEO provided know-how, equipment, method of operation and standards of quality control. Not only this, they identified and approved the customers as well thereby provided managerial expertise and marketing techniques to KAM. This helped Franchisor in retaining their reputation attached to their Logo or Trade Marks used by the bottling units like KAM. Thus may be pertinent to say that there was no such requirement to be fulfilled after 16.05.2005 when this part of the definition was omitted. &nbs....
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....rovided or to be provided to a Franchisee, by the Franchisor in relation to Franchise. This case clearly shows as also recorded under para 30 & 31 of the OIO that M/s DIOAGEO and the bottling units had principal to principal relationship and M/s. DIAGEO have given representational right to bottling units who represented themselves as manufacturer of DIAGEO brand IMFL. In the OIO it is clearly analyzed that their arrangement was not of a contract bottler as being argued by them relying upon CBEC Circular F. No. 249/1/2006-CX-4 dated 27.10,2008. Since their Agreements changed to job work agreements only from 01.04.2006 these cannot be made applicable for the material period that is between 01.07.2003 to 31.03.2006. Conclusion: As all the parameters of the definition of Franchise Service as existed on 01.07.2003 or on 16.06.2005 are present in the Agreements between M/s. DIAGEO India Pvt. Ltd. (DIAGEO for short) and alcohol manufacturers namely, M/s. AABL, M/s. KAMIPL and M/s. United Distilleries. Hence M/s. DIAGEO have provided Franchise service as finally concluded in para 37 of the OIO. 6. Considered....
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....entitled to have transferred to itself the surplus balance from the bottling operations; and (g) All the commercial risks are to the account of the appellant; (h) Similar Contract Bottling Agreements were entered into it with other CBUs by the appellant. 9. The terms of the Agreement, CBUs to manufacture the products for and on behalf of the appellant at the plant of CBU using the appellant's equipment. The Agreement clearly states that the CBU has no right to use the intellectual property of the appellant and there is no transfer of any IPR to the CBU from the appellant. The CBU has no claim whatsoever on the rights of the appellant. The nature of transaction between the appellant and CBU indicates that the appellant to use the brand on his own account and there i no representational right given to the bottling unit for the brand name. The commercial interest of the bottling unit is to earn the consideration for bottling or manufacturing the alcoholic beverages. The appellant uses the bottling units for producing the said beverages in their brand names for sale in profit. The said activity has been dealt with by the CBEC in their Circular No. 332....