TaxTMI 
TaxTMI 
2015 (5) TMI 705
X X X X Extracts X X X X
X X X X Extracts X X X X
....uly recorded in the impugned order are as under: (i) The appellant (M/s Amway India Enterprises Ltd., new Delhi) is a wholly owned subsidiary of Amway Corporation USA which is a large direct selling company. The appellant is registered as a S.T. assessees. (ii) It was alleged that (a) the appellant had not paid service tax on expenditure incurred in foreign exchange on taxable service namely Intellectual Property Right service received from its associate enterprises based abroad and also under Franchisee service on the income received by it in the form of subscription from various distributors appointed by the company which were given the representational rights to sell the products of the appellant. All these products bore the various brand names belonging to the appellant. (b) The sale pattern of the company is such that these Amway products are sold by the distributor directly to the consumers and no product of the company is available across the counter in any shop or market. Subscription income basically consists of Joining and Business Fee , Business Renewal Fee and Back to Future Fee which are briefly described below: "Joining Fee Joining Fees is a onetime fee, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder Section 75 of the Act ibid. 4. As regards the impugned demand under franchise service, the adjudicating authority analysed the provisions of the appellant s agreement with the distributors and concluded that the appellant granted representational right to sell the goods identified with it (i.e. the appellant) and therefore were liable to service tax under franchise service. 5. Regarding the impugned demand relating to IPR service, the appellant has essentially contended as under: (i) The impugned order is a non-speaking order inasmuch as it has not dealt with the following submissions made before the primary adjudicating authority; (a) it had paid service tax in respect of such IPR service for which they were registered in India after claiming the benefit of Notification No.17/2004-ST dated 10.9.2004. (b) It cited the definition of Intellectual Property Right in Section 65 (55a) of the Finance Act, 1994 which is reproduced below: "intellectual property right means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property , under any law for the time being in force, but does not include copyright. Referring t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... judgment in the case of UOI and Another vs. Hansoli Devi and Others (2002) 7 Supreme Court Cases 273 wherein it was held that it was not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute . It also approvingly referred to a case of Quebec Railway, light Heat & Power Co. Ltd. vs. Vandry AIR 1920 PC 181 wherein it was observed that the legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the legislature will not be accepted except for compelling reasons . The judgment in the case of Global Transgene Ltd. vs. C.C.E. Cus & S.Tax, Aurangabad 2013 (32) STR 86 (Tri-Mumbai) was also cited essentially to stress that right to sell is different from the representational right to sell. It reiterated that it had only granted the distributors right to sell goods identified with it and not the representational right to sell such goods. It referred to the provisions relating to Franchise in some other countries and the dictionary meanings of representation or representatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... impugned demand relating to intellectual property are clearly and admittedly non-speaking. Indeed, the first 6 = lines of the said para 28 are essentially reproduction of para 18 of the order-in-original No.01-ST/PKJ/CCE/ADJ/2011 dated 31.1.2011 passed in respect of the appellant in a case relating to a different show cause notice. The said para 28 is also factually misleading inasmuch as it incorrectly states that the noticees have not disputed that they have received taxable services from their associate enterprises and they were liable to pay service tax under reverse charge in terms of Section 66A of the Finance Act, 1994 Thus both sides have rightly agreed that the impugned adjudication order relating to the confirmation of service tax demand under intellectual property service is a non-speaking one. 9. The appellant has argued that by virtue of the impugned order being clearly non-speaking in respect of impugned demand under intellectual property service and it not being open for CESTAT to improve upon the same, the impugned order in relation to impugned demand under intellectual property service has to be summarily set aside. In this regard, it placed reliance on the jud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....randum of written submissions, within the time stipulated herein. Punjab and Haryana High Court in the case of C.C.E., Ludhiana vs. Gulab Industries (P) Ltd. (supra) in effect held that negligence by officers can not be a ground to allow a delinquent to go scot free and that an order issued in violation of principles of natural justice should be remanded instead of allowing the defaulting party to go scot free. In paras 8 & 9 of this judgment, the P & H High Court observed as under: 8. We have heard counsel for the parties, perused the impugned order as well as the order passed by the adjudicating officer and are sanguine, in the case correctness of our opinion, that the case in hand may disclose collusion, or to put in politely, negligence on the part of certain officers. It is further surprising that an officer of the rank of Additional Commissioner, was not aware that he is required to append all relevant documents with the show cause notice, and if not appended, to provide copies to the noticee within reasonable time, before proceeding to adjudicate the show cause notice. Admittedly, documents were not supplied to the respondent. The negligence does not end here. The appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty in the statue, However, the word franchise is defined in Section 65 (47) of Finance Act 1994 and therefore any reference to the meaning of the said word in other countries is of no direct relevance, because for the purpose of this case, we have to go only and only by the definition of franchise given in Section 65 (47) ibid. Therefore, it will be pointless to indulge in any analysis with regard to the meaning of the word franchise in other countries (and in relation to any other Indian law for that matter). In this regard it is useful to extract below the portion of para 9 from the judgment in the case of UOI and Another vs. Hansoli Devi and Others (supra): "A provision is not ambiguous merely because it contains a word which in different contexts is capable of different meanings. It would be hard to find anywhere a sentence of any length which does not contain such a word. A provision is, in my judgment, ambiguous only if it contains a word or phrase which in that particular context is capable of having more than one meaning . 12. It is evident that the only issue involved in the present case to the extent it relates to the impugned demand under franchise service is wheth....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and/or Amway. Thus the ABO is not merely having right to sell Amway product; he also does presentation of Amway s Sales & Marketing Plan which inter alia also includes Amway s system, procedures and policies regarding presentation of Amway s products, the Amway s business and Amway s organization. The ABO is also required to conduct and behave in the manner prescribed so as not to jeopardize the reputation of Amway. As per para 4.13 of the Guide, no distributor shall represent to anyone that there are exclusive franchises or territories available under the Amway Sales and Marketing Plan. No distributor shall represent that he or she or anyone else has the authority to grant, sell , assign or transfer such franchises or to assign or designate territories. Thus the Business Starter Guide clearly delineates as to in what respects/aspects the ABO can not represent. In other words, it follows that it is incorrect to claim that a distributor has not been granted representational rights to sell products identified with Amway It becomes further evident from para 8.2 of the said Guide which states that. At the first contact with prospective customers and Distributors, a Distributor shou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the words on behalf of is also not of much relevance because these words nowhere appear in the definition of franchise . Reference to the meaning of the words Represent and Representational given in Oxford English Reference Dictionary and the Law Lexicon have been perused. Some of the meanings of represent in Oxford Dictionary are stand for , corresponds to , be example of , symbolize , make out , portray be entitled to act or speak for etc. Meanings of the word represent in Law Lexicon are same/similar to those given in Oxford Dictionary. The aforesaid meanings of the word represent are in fact far wider (in scope) than required to hold on the basis of aforesaid analysis that ABOs clearly had representational right to sell goods indentified with Amway. The impugned order therefore, cannot be faulted for concluding accordingly on the basis of the Amway Business Starter Guide, Distributor Application and Terms and Conditions etc. 14. In para 44 of the impugned order, the adjudicating authority has held that extended period of limitation is applicable in terms of proviso to Section 73 (1) of Finance Act, 1994 . However, we find that the adjudicating authority in para 49 of the ....