TaxTMI 
TaxTMI 
2014 (8) TMI 591
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....The second level domain can serve requirement of specific entities like 'business', 'company', etc. 2. Data base of all domain name is required to be maintained. There is a need to link a particular domain name with a particular computer on the internet protocol. The Registrar are entities which contract with the registered name holders and the registry and collects registration data about the registered name holders and submit the same to the registry for entering in the data base maintained by the registry. 3. As mentioned earlier, appellant is engaged in the activity of registration of website domain names i.e. appellant is a registrar. The appellant is also accredited by International Corporation for Assigned Names and Numbers (ICANN) for certain top level domains. The appellant is registering domain names permitted by ICANN and ICANN accredited registries. The appellant is paying fee as per agreements, fixed and variable to ICANN and various registries (who are also accredited by ICANN). 4. The first Show Cause Notice dated 4.2.2011 is issued for the period from March 2006 to November 2010 and is in respect of the foreign remittance made by the appella....
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..... Moreover the activity carried out by the appellant is not identified with the alleged franchiser and therefore no service tax is payable by the appellant. The appellant is merely accredited as a domain name registrar. The relationship between ICANN and the registrar is defined by the agreement between the two. In the said Agreement (i) Sub-clause 2.1 grants the accreditation to the registrar; (ii) Sub-clause 2.2. permits the registrar to state that it is accredited by ICANN and to link to pages and documents within the ICANN website; and (iii) Sub-clause 2.3 deals with general obligations. 10. The learned advocate for the appellant submitted that the department's case revolves around clause 2.2 of the agreement. Based on the said sub-clause 2.2, the department contended that the said sub-clause permits the appellant to use the brand name of ICANN and use of such brand name results in a crucial branding advantage to the appellant which is not available to an ordinary registrar and therefore a representational right is granted. The learned advocate for the appellant contended that there is a huge difference representing ICANN and stating that the appellant is an ICANN accred....
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....ial restrictions and accredited registrar is free to conduct his business in any manner and under any brand. These aspects of the agreement are fundamentally different from a franchise agreement where it is always open for the franchiser to choose a particular franchisee over another without attributing any specific reasons. 13. Following points were also submitted: (a) ICANN does not recognize its receipts as franchise income; (b) The appellants do not recognize the expense as franchise expense; (c) Neither ICANN's nor the appellants website refers to either the appellant as a franchiser or franchisee; (d) The invoice raised by ICANN does not refer to franchise; (e) The invoice raised by the appellant to the customer neither contains any reference to a franchise arrangement nor to any brands or name of ICANN. 14. It was also submitted that even ICANN has issued letter confirming that the appellant is not a franchisee and no representational rights have been granted to the appellant. It was submitted that the appellant has not surrendered his own identity. It cond....
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....vice tax is payable by the appellant, still no service tax can be demanded on the portion of services which qualified as export of services in terms of the Export of Services Rules, 2005. It was submitted that out of the total output turnover of Rs. 4,73,86,19,240/- only Rs. 88,39,16,786/- is towards the domestic sales and all the remaining sales are made to the resellers located outside India and the amount was received in convertible foreign exchange and all other conditions under Export of Service Rules, 2005 are duly fulfilled. 21. It was also submitted that assuming that the services provided by ICANN and registries are taxable, the service provided are outside India. When registries and ICANN provide such alleged services, the benefit of such services directly flow to the resellers of appellant outside India and therefore such services are never received in India and in terms of Import Rules the services should be received in India and since such services are not received in India, no service tax can be levied in India. It was also contended that the benefit of Cenvat Credit should be given to the appellant. Similarly if at all its activities are held as taxable then cum-d....
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....mercial field, each domain name owner provides information/services which are associated with such domain name and thus a domain name may pertain to provision of services within the meaning of Section 2 (z) of the Trade Marks Act, 1999. The law enunciated in this regard is that the domain names are subject to the legal norms applicable to other intellectual properties such as trade marks . 24. The learned special counsel for the Revenue thereafter took us through the agreement between ICANN and the appellant. The said agreement is called the Registrar Accreditation Agreement (RAA). The appellant is registrar as per Clause 1.9 and as per clause 1.110 "Registrar Services" means services provided by a registrar in connection with a TLD as to which it has been an agreement with TLD's registry operators and includes contracting with registered name holders, collecting information about such entities and submitting the same for entry in the registry database. As per clause 2.2, ICANN grants to registrar (appellant), a non-exclusive, worldwide royalty-free licence - (a) to state that it is accredited by ICANN as a registrar for each TLD; and (b) to link to pages and documents withi....
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....reement is Reseller Master Agreement which was gone through is between appellant and the reseller. In this agreement appellant are the parent providing various products and services and the re-seller buying/receiving various "parent products" and "parent services". There are parent servers and parent website. Clause 1 (25) gives the definition of and reference to ICANN. Even in the Re-seller Domain Registration Product Agreement Extension, in clause 1 (4) there is a reference to ICANN. From the definition of obligations of re-seller and rights of parent, the important and indispensable role of ICANN is discernible. Appendix B lays down the list of Top Level Domains that the parent is authorized to provide domain name registration and management services. Thus the reseller is obligated to get domain name registration and management services of .com, .net, org, biz, .info though the parent registrar Directi Internet Solutions Pvt Ltd who in turn are duly authorized by ICANN to provide such registration and management services. 27. The learned special counsel submitted that from the three agreements, it is clear that the services received/provided by the appellant satisfied the def....
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....of Service Tax law. 30. It was also contended that interest has been correctly demanded and penalty has been rightly imposed. 31. We have considered the rival submissions. We find that demand notices have been issued under the Franchise Service. The terms "Franchisee" and "Franchiser" have been defined under Section 65 (47) and 65 (48) of the Finance Act, 1994 and at the relevant time are as under: "65 (47) "franchise" means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved 65 (48) "franchisor" means any person who enters into franchise with a franchisee and includes any associates of franchisor or a person designated by franchisor to enter into franchise on his behalf the term "franchisee" shall be construed accordingly." 32. It would thus be seen from the above mentioned definitions that franchisee means an agreement by which the franchisee is granted representational rights to sell or manufac....
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....rticipation reflecting the functional, geographic, and cultural diversity of the Internet at all levels of policy development and decision-making. 5. Where feasible and appropriate, depending on market mechanisms to promote and sustain a competitive environment. 6. Introducing and promoting competition in the registration of domain names where practicable and beneficial in the public interest. 7. Employing open and transparent policy development mechanisms that (i) promote well-informed decisions based on expert advice, and (ii) ensure that those entities most affected can assist in the policy development process. 8. Making decisions by applying documented policies neutrally and objectively, with integrity and fairness. 9. Acting with a speed that is responsive to the needs of the Internet while, as part of the decision-making process, obtaining informed input from those entities most affected. 10. Remaining accountable to the Internet community through mechanisms that enhance ICANN's effectiveness. 11. While remaining rooted ....
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....p; 1.9 The word "Registrar," when appearing with an initial capital letter, refers to Direct Internet Solutions d/b/a PublicDomainRegistry.com, a party to this Agreement. 1.11 "Registrar Services" means services provided by a registrar in connection with a TLD as to which it has an agreement with the TLD's Registry Operator, and includes contracting with Registered Name Holders, collecting registration data about the Registered Name Holders, and submitting registration information for entry in the Registry Database. 33.2 The other clauses referred by the learned Special Counsel for the Revenue are clauses 2.2 and 3.1. These two sub-clauses are also reproduced below: 2.2 Registrar Use of ICANN Name and Website . ICANN hereby grants to Registrar a non-exclusive, worldwide, royalty-free license during the Term of this Agreement (a) to state that it is accredited by ICANN as a registrar for each TLD that is the subject of an appendix to this Agreement and (b) to link to pages and documents within the ICANN web site. No other use of ICANN's name or website is licensed hereby. This lice....
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....ovided, however, that Registrar may not use such data subject to opt-out for marketing purposes in its own value- added product or service. 34. Another important part of the agreement referred by the Special Counsel is "LOGO LICENSE APPENDIX'. The relevant part is reproduced below: REGISTRATION AND ENFORCEMENT Registrar wishes to acquire from ICANN, and ICANN wishes to grant to Registrar, a license to use the trademarks listed below the signature block of this Logo License Appendix ("Trademarks") in connection with Registrar's role as an ICANN-accredited registrar. Pursuant to and subject to the Registrar Accreditation Agreement, Registrar and ICANN hereby agree as follows: LICENSE 1. Grant of License. ICANN grants to Registrar a non-exclusive, worldwide right and license to use the Trademarks, during the term of this appendix and solely in connection with the provision and marketing of Registrar Services in order to indicate that Registrar is accredited as a registrar of domain names by ICANN. Except as provided in this sub-section and Sub-section 2.2 of the Registrar Accreditation A....
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....mentioned sub-clauses, ICANN Accredits the appellant after identifying and setting minimum standards for the purpose of registration functions. Further, Clause 2.2 permits the appellant to use a symbol which indicates that ICANN has accredited the appellant. We have also gone through and seen the said symbol which is reproduced below: 36. From the mission and core values as also the agreement between ICANN and the appellant we are not able to find out any service or a process for which ICANN is associated and is being provided by the appellant. Appellants provided registrar service as per the powers under Article II of powers for ICANN, ICANN is prohibited from acting as registrar. From the agreements or from the bylaws, we are not able to find any process that has been developed by the ICANN and being used by the appellants. We find what is being done by the ICANN is to set minimum standards for the performance of registration function and recognize that the appellants are meeting those standards. Revenue has not been able to pinpoint to us either any service or any process for which ICANN is known and that process is being used or being provided by the appellants. In the absen....
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....pdate the name servers of a domain name, (vi) transfer a domain name from another registrar to itself with proper authorization, (vii) query a domain name registration record, (viii) register a name server, (ix) update the IP addresses of a name server, (x) delete a name server, (xi) query a name server, and (xii) establish and end an authenticated session. 4. SUPPORT SERVICES 4.1. Engineering Support. VNDS agrees to provide Registrar with reasonable engineering telephone support (between the hours of 9 a.m. to 5 p.m. EST or at such other times as may be mutually agreed upon) to address engineering issues arising in connection with Registrar's use of the System. 4.2 Customer Service Support. During the Term of this Agreement, VNDS will provide reasonable telephone and e-mail customer service support to Registrar, not Registered Name Holder or prospective customers of Registrar, for non-technical issues solely relating to the System and its operation. VNDS will provide Registrar with a telephone number and e-mail address for such support during implementation of the Supported Protocol, APIs and Software. First-lev....