TaxTMI 
TaxTMI 
2017 (12) TMI 1197
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.... the client has to make onetime payment apart from certain monthly payment. In terms of the said agreement the client are obliged to purchase the beverages ingredient from the appellant. The premises of the client are approved by the appellant in terms of the agreement and position where machine is to be placed in the client's premises is decided by the appellant in terms of agreement. The clients are prohibited to sell any other beverages other than those specified by the appellant from time to time from the said vending machine. The clients are obliged to follow the operating instruction of the said machine, the appellant are obliged to maintain proper stock of the raw material purchased from the appellant. In terms of the said agreement the client are also obliged to maintain and keep intact, the original logo, advertisement or any other indication, mark affixed on the said machine. The Franchisee are prohibited from obstructing, moving or removing the said logo/advertisement/mark or adding any other logo, advertisement, mark etc than(other than the ones agreed/approved by the appellant) to the said machine. The said clients are not allowed to move the said machine from the agre....
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....her argued that they have paid sale tax on the said transaction and therefore it is to be treated as transfer of property and therefore No. service tax can be levied. Ld. C.A further argued that benefit of cum tax duty has not been extended. For this assertion he relied on the decision of Tribunal in case of CCE Vs. Advantage Media Consultant [2008(10) S.T.R. 449 (Tri. Cal) which was maintained in the Apex Court reported as [2009(104) S.T.R. 0J49 (SC)]. 2.5 In so far as issue of limitation is concerned, Ld. C.A. argued that they were paying sales tax on the same transaction and in this circumstances there cannot be intention to evade service tax. 3. Ld. A.R. relies on the impugned order. He further argued that prior to 16-6-2005 the definition of 'franchise' contains four limbs however said definition was amended by the Finance Act, 2005. Ld. A.R. argued that appellant are squarely covered under the definition of franchise service as they granted representational rights to their clients. 4. We have considered rivals' submissions. 5. Prior to 16-6-2005 the definition of 'franchise' reads as follows. "(a) "Franchise" means an agreement by which - (i) Franchise....
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....franchisor" means any person who enters into franchise with a franchisee and includes any associate of franchisor or a person designated by franchisor to enter into franchise on his behalf and the term "franchisee" shall be construed accordingly" 5.2 In the instant case the appellant are giving machine containing their company logo, which may be illuminated, affixed on the said machine. The said machine in terms of agreement is required to be placed in such manner that the logo/illuminated logo is clearly visible. Ld. C.A. have relied on the decision of Hon'ble Delhi High Court in case of Delhi International Airport P. Ltd Vs. Union of India[2017(5) STR 275(Del)]. In the said case the appellants were appointed by Airport Authority of India(AAI) for long term operation, management and development of Delhi Airport. This was done under policy decision of Government of India to privatize Airport for their better management. In the said case facts were as follows: 8. The consortium led by the GMR Group was selected by the AAI as the successful bidder to design, construct, operate, maintain, upgrade, modernise, finance, manage and develop the Delhi airport and the consortium led by....
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....from which they are transferred to a Proceeds Account. From the Proceeds Account, payments are first made towards statutory dues and out of the balance, AAI is paid the Annual Fees and any other amounts due to it under the OMDA. The balance is transferred to a Surplus Account, which comes to the petitioneRs.as their respective share of the Revenue. In the said case the defence of the appellant was what they are recovering is only share of the Revenue and DIAL is not paying to Airport Authority of India. In para 28 and 29 of the said order following has been observed. 28. It is further submitted that the AAI's share is not relatable to any Franchise but is a 'revenue share' and the Annual Fees is paid out to the AAI through an escrow mechanism even before any portion of the gross revenue is received by the petitioners. It is contended that the Annual Fees is not a 'consideration' paid by the petitioner to AAI for any service, but is an appropriation of Revenue by AAI even before any part of the Revenue is received by the petitioners. 29. It is contended that the AAI has a right to receive its specified revenue share. The gross revenue is appropriated by AAI at its very sour....
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....hisor. 58. A representational right would mean that a right is available with the franchisee to represent the franchisor. When the Franchisee represents the franchisor, for all practical purposes, the franchisee loses its individual identity and would be known by the identity of the franchisor. The individual identity of the franchisee is subsumed in the identity of the franchisor. In the case of a franchise, anyone dealing with the franchisee would get an impression as if he were dealing with the franchisor. The above observations essentially summerised the test for existence of franchisee. 5.4 The appellant also relied on the Tribunal in case of Global Transgene Ltd Vs. CCE[2013-TIOL-1259-CESTAT-MUM]. In the said case facts are as under: 3.1 The contention of the appellant is that they have entered into a Commercial Agreement dated 14.10.2001 with M/s. Biocentury Transgene (China) Co Ltd (BTC) to multiply cotton seeds containing 'Fusion Bt. Technology' for transferring the technology to the sub-licensees. Under this contract, they are liable to pay royalty to BTC. This transaction is not under dispute in this appeal. 3.2 Pursuant to this agreement, the appellant en....
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.... fact in case are different. In the instant case the agreement contains following clause. WHEREAS GPI is in the business of selling beverage ingredients(for hot and cold beverages) of different flavours, premixes and syrups (hereinafter called "Raw Materials") as well as placement and maintenance of its branded beverage vending machines. WHEREAS The Franchisee has approached GPI and represented that it has the required location and requisite infrastructure and has offered to run and operate GPI's vending Machine at this location using GPI Raw Materials and as per technical assistance and guidance of GPI at its premises. AND WHEREAS relying upon the aforesaid representations of the Frenchisee, GPI has agreed to enter into this agreement on such terms and conditions as mentioned hereinafter. NOW THIS AGREEMENT WITNESSETH and it is hereby mutually agreed between the parties hereto as follows: -- ARTICLE 2 INSTALLATION: GPI shall install __No. of Beverages Vending machines (hereinafter referred as the said machine/s) along with accessories more particularly described in Annexure-A attached herewith, at the premises of the Franchisee located at______(complete address).....
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....s original place of installation without prior written approval of GIP. In the event the machine contains an illuminated signs, shall kept such sign illuminated at all times. ARTICLE 6: INTELLECTUAL AND PROPRIETORY RIGHTS : The Franchisee shall not have any rights, titles or interests including intellectual/ proprietary rights or otherwise in or to the GPI trademarks, trade names, logos, said raw materials machines etc supplies by GIP RTICLE 7: OWNERSHIP AND TITLES: The ownership rights titles, interests etc in the said Vending Machine shall always vest with GPI. The Franchisee hereby agrees to hold the same as a Bailee in trust for GP1 without any right, title or interest in or to the same and shall neither sell, alienate, mortgage, with-hold the same in any manner whatsoever nor it shall create any charge or encumbrance on the same. it shall not have any right of unpaid vender lien in respect of the said Vending Machine. The said Vending Machine is and shall at all times remain sole property of GPI and GPI shall have the absolute rights to take away, remove, renovate, replace and or to deal with it in any manner and at any time as it may deem Fit and proper. Perusal of t....
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....ssue of limitation relying on the facts that they have paid sales tax on the same transaction therefore there was No. intention to evade duty. We find that the mere fact of payment of sales tax is not sufficient to hold that they are not liable to service tax. The decision relied upon in their defence like Bharat Sanchar Nigam Ltd. Versus Union of India[2006 (2) S.T.R. 161 (S.C.)] and Shilpa Color Lab Versus Commissioner of C. Ex., Calicut[2007 (5) S.T.R. 423 (Tri. - Bang.)] also recognized that mere fact that sales tax is been paid is not sufficient to hold service tax cannot be levied in respect of the said transaction. 5.6 The appellant have raised issue of valuation relying on the decision of CCE Vs. Advantage Media Consultant[2009(014)STR 0J49 (SC)], we find merit in the said contention and held that cum tax benefit needs to be extended to the appellant. 5.7 They have further argued that there was No. intention to evade payment of duty therefore penalty should not have been imposed. The have further argued that simultaneous penalty under Section 76 and 78should not be imposed relying on the decision in case of IN RE : Mahadev Tamanna Sargar 2010 (19) S.T.R. 139 (Commr. A....