TaxTMI 
TaxTMI 
2018 (6) TMI 669
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.... affiliated centers (Franchise Service). 01/07/2003 to 30/06/2004 2,14,225/- 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 dire....
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....definition of Manpower Recruitment and Supply Agency Service falling under Section 65(68) read with Section 65 (105)(k). Service tax demand amounting to Rs. 21.07,763 for period 1/04/2003 to 31/03/2006 as well 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). ....
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....echnology Services which became taxable from 16/05/2008 and thus cannot be taxed prior to this act. The argument of time has also been raised. (e) Regarding the demand under Manpower Recruitment or Supply Service, he submitted that the activities undertaken can 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; ....
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....case, the Tribunal has upheld the demand under the Franchisee Service but set aside the penalty by taking recourse to Section 80 of the Act. The observations of the Tribunal are reproduced below:- "12. On the factual matrix on the perusal of the agreement entered by the appellant with one of the franchisees, we find 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 a....
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....iness. The definitions of Franchisor under Section 65(48) of the Act, means "any person who enters into franchise with an franchisee and includes any associate of franchisor or a person designated by franchisor to enter into franchisee's on his behalf. The agreement as placed before us refers the appellant as the franchisor and the other party as franchisee. In terms of the said agreement 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 ....
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.... order of the co-ordinate Bench that the issue is now covered in favour of the Revenue and against the assessee on merits." 10. The appellant has submitted that they were under the bonafide belief that no Service Tax is liable to be paid under the Franchise Service. But the Adjudicating Authority has recorded that the appellant has failed to disclose the fact that such amounts were being recovered 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 operation....
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....onsultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management." Taxable service was defined in Section 65(105)(r) as - "any service provided or to be provided to a client, by a management consultant in connection with the management 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 o....
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....neration of roll numbers, answer sheets, printing of test paper, printing of OMR sheet etc. It is evident that such activities are in the nature of pre-recruitment work. Revenue was of the view these activities would be covered within the definition of Man Power or Supply Agency Recruitment Service defined under 65 (105) (k). The definition is reproduced below:- "[to any person], by a manpower recruitment or supply agency in relation to the recruitment 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 se....