TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 669
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.... 2. Operation and management of computer centers of Department of Science and Technology(Management Consultancy service) 01/04/2003 to 31/03/2006 2,44,99,380 /- 01/04/2006 to 31/03/2007 4,53.0 22/- 3. Preparation of call letters, question papers, evaluation etc. for other parties (Manpower recruitment or supply agency service) 01/04/2003 to 31/03/2006 21,07,763/- 01/04/2006 to 31/03/2007 1,41,8 1,142 /- 2. The appellant is engaged in activities relating to information technology. The disputes can be crystallized into three issues and these are briefly discussed separately below for a proper appreciation of the facts; 2.1 Franchise Service The appellant has developed and is running a course called "Diploma in Advanced Software Technology (DAST). This course is run partially through the appellants own centers and also through certain other centers affiliated to it. The students undergoing these courses at the affiliated centers, pay fee directly to the appellant. Out of the said amount, 75 % is retained by the appellant and the rest paid to the affiliated centre. The Revenue was of the view that for the 25% amount retained by....
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....ell as Rs. 1,14,81,142 for period 1/04/2006 to 31/03/2007 has been confirmed vide the impugned orders. 3. The adjudicating authority has also ordered payment of interest as well as penalties under various sections of the Finance Act, 1994. The above two orders-in-Original have been challenged before us. 4. In this connection, we have heard Shri Narender Singhavi, Ld. Advocate for the appellant as well as Shri. Amresh Jain, Ld. DR representing Revenue. 5. The case argued by the Ld. advocate on behalf of the appellant is summarized below: (a) Regarding the demand under category of Franchise Service, it was submitted that the issue has been decided against the appellant in appellant's own case decided by the Bangalore Bench of the Tribunal which is reported as CMC limited vs. Commissioner 2011(23)STR(586) (Tribunal Bangalore). He also fairly conceded that the assessee's appeal against the said order was dismissed by the Hon'ble Supreme Court 2016(43) STR J 84(ST). However he submitted that the entire demand under this category is time barred in as much as the appellant did not suppress any facts and was under the bonafide view that the activities were covered by the exemption Not....
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....an be categorized as pre/ recruitment activities. Such activities have been included within the definition by insertion of Explanation in Section 65(105) (k)only with effect from 1/06/2007. He submitted that by introduction of the Explanation, the scope of the taxable service has been expanded by including the pre recruitment activities. Such an amendment has to be considered as prospective, since it creates the tax liability on the appellant hence he argued that the demand prior to 1/06/2007 is not sustainable. In this connection reliance is placed on the following decisions; * Mcdonald's India Private Limited v. Commissioner, 2017 (50) STR 156 (Tri-Del), upheld by Hon'ble High Court at 2018 (8) GSTL 25 (Del) * Union of India v. Martin Lottery Agencies Limited, 2009 (14) STR 593 (SC) 6. The Ld. DR opposed the arguments and justified the impugned order. His arguments are summarized bellow; (a) Regarding the demand raised in the category of Franchise Service, he submitted that the issue on merit is decided against the appellant. He justified the demand for the full period with the argument that the Bangalore Bench in the case of CMC has only waived the penalty hence he appeal....
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....d that in clause No. 5, there is a clear cut restriction on the franchisee in the following terms :- "5. Territory, Audience and General curriculum : i. The Franchisee will not conduct their own technical classes/teaching topics similar to those included in the standard CMC Modular DAST Course covered under this agreement." 13. From the above reproduced Clause No. 5(i) of the agreement, it is very clear that the franchisees are not allowed to conduct their own technical classes/teaching topics similar to those included in the course given by the appellant through the franchisees. In Clause No. 7, the agreement specifically indicates that there has to be periodic reporting and audit in respect of the students who undertook the courses conducted by the appellant. It is also seen from the said clause that the franchisee has to provide an annual business plan which includes marketing and teaching plans of the courses covered under the agreement and that said clause also talks about forecasting the amount of royalty payments expected to be paid to the appellant. We find that Clause No. 11 of the said agreement is of financial considerations to be paid by the franchisee to the appe....
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....ent there are obligations on the franchisee to set up the adequate premises and to conduct the business in accordance with the terms of the agreement. For the said franchisee, is under an obligation to pay fixed amount to the appellant and in addition recurring franchisee fee at the rate of 15%. The purpose of the agreement of franchisees is to enable franchisee to carry on the business in the manner desired by the franchisor. The agreement also reveals that the appellant shall provide prospectus, course material, brochure, leaflets, direct mail materials, stationery etc. They shall also provide additional training to the staff franchisee request at additional cost. As such, it is seen that the agreements between the appellant and their franchisees satisfy all the four requisites of the definition of 'Franchise' as provided under Section 65(47) of the Act, and the appellant is liable to pay service tax on the said services. 7. The appellants have also claimed the benefit of Notification No. 9/03-S.T., dated 20-6-2003, which exempts taxable services provided in relation to commercial training or coaching by a vocational training institute, computer training institute or a recreati....
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....and retained by the appellant and hence he has concluded that the value retained by the appellant has escaped Service Tax. We are of view that the appellant is liable to make payment of Service Tax under the category of Franchise Service for the full period of demand. However, by following the decision of the Bangalore Bench, we set aside the penalties by taking recourse of Section 80 of the Act. 11. The second part the demand of Service Tax has been raised under the category of Management Consultancy Service. The appellant has entered into an agreement with the Department of Science and Technology (DST). Various activities were required to be carried out by the appellant under this agreement, towards Facility Management Services. The activity included those related to the operations of the computer systems; providing management services; providing technical service; management of computer facility and also providing systems software personnel for installment of software, managing user account, setting up and maintaining the network development of utilities etc. Revenue is of the view that the activities are covered within the definition of Management Consultancy Services. But the....
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....nagement of any organization, in any manner". From the above definition, it can be seen that the definition consists of two parts. The first part says that any service either directly or indirectly in connection with the management of any organisation in any manner would be a management consultancy service. The expressions used in the definition, namely, 'means' and 'includes', 'either directly or indirectly', 'in connection with the management' and 'in any manner' are expressions of width and amplitude and includes in their scope any service in relation to the management of any organisation. The second part of the definition is the inclusive part which provides for rendering of any advice, consultancy or technical assistance in specific areas of management. 13. It has been vociferously argued on behalf of the appellant that the activities under the agreement involved operation and management of the facilities for DST but did not involve any consultancy. When we carefully consider the definition of Management Consultant as it existed during the different periods, it is evident that the appellant has not carried out management of any complete organization such as the DST. But what....
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....ruitment or supply of manpower, temporarily or otherwise, in any manner.] w.e.f. 01.06.2007 [Explanation.- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, recruitment or supply of manpower includes services in relation to pre-recruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted by the candidate;]" 16. The appellant does not deny the fact that the activities are in the nature of pre recruitment work but claims that it willl be covered within the definition only after the insertion of the Explanation w.e.f. 01/06/2007. It is their contention that the Explanation has to be read prospectively as it seeks to expand the scope of the levy under this category. But Revenue through the Ld. DR have submitted that the activities would be covered within the main definition with or without the Explanation. 17. The definition covers service rendered to any person in relation to recruitment or supply of manpower. Evidently, the pre recruitment work provided by the appellant would definitely come within the category of 'service rendered in relation to supply of manpower'. No d....