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TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 25
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....aster license agreement dated 01/10/202 with SIBV for developing franchise and service Sandwich shops to be known as franchise to SSIPL. The Department further observed that as per the said agreements Clause 3.03 thereof each franchise was liable to pay weekly royalty and an amount equal to 8% of their total gross sales and an advertising fee equal to 4.5% of their total gross sales and the appellant had further to pay royalty amount @ 35% to SIBV of all fee and royalties derived from each and every sandwich shop that is the franchise in India. However, it was noticed that the appellants were discharging their tax liability qua the royalty amount received from the franchise which was equal to 8% of the total gross sales, but, no liability was being discharged for an amount received equal to 4.5% of the weekly gross sales towards the contribution referred to as Subway Franchise Advertisement Fund Trust (SFAFT). Resultantly show cause notice No. I-26(494) ST/APR (Gr. III)14/2008/4253 dated 13 February 2009 was served upon the appellant proposing the recovery of service tax alongwith the interest and penalty as follows :- (i) Service tax amounting to Rs. 10,06,940/- on account of rev....
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....ves and there is no control of the appellant upon the said amount. Even after the said amount remotely benefited the appellant had still cannot be the consideration for the service provided by the appellant as that of "franchise". Above all the said amount is reflected as a liability in the books of account of the appellant and is not accounted as income. The decision of Philips India Ltd. vs. CCE, Pune - 1997 (91) E.L.T. 540 (S.C.) is relied upon, whereby it was held that the advertisement expenses shared by the dealer thereby do not form part of the assessable value. The appellant also relied upon the decision of Intercontinental Consultants & Technocrafts Pvt. Ltd. vs. Union of India - 2013 (29) S.T.R. 9 (Del.), wherein it was held that for valuation of taxable service only consideration which is paid as quid pro quo can be brought to the charge. Finally, it is impressed upon that there is no malafide intent on the part of the appellant to evade any payment of service tax as is alleged question of imposition of penalty does not at all arises. Order under challenge is accordingly prayed to be set aside and appeal is prayed to be allowed. 2.1 Rebutting these arguments, it is subm....
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....ity persists in Section 67 of the Act whatever is included in the section has to be considered as the value for taxable service. The wording of the said provision being absolutely clear no other interpretation can be attributed to the same. We draw our support from the decision of Apex court in the case of Government of Andhra Pradesh vs. P. Laxmi Devi - (2008) 4 SCC 720, wherein it was held that if the words used in a taxing statute are clear, one cannot try to find out the intention and the object of the statute. Thus the correct assessable value of the service provided since service commands that value only and that should only be taxed without any hypothetical rule of computation of value of taxable service under Section 67 of the Act. Section 67 reads as follows :- "7. Section 67 of the Act deals with valuation of taxable services. This Section was amended w.e.f. April 18, 2006. Un-amended provision reads as under: "67. Valuation of taxable services for charging service tax. - For the purposes of this Chapter, the value of any taxable service shall be the gross amount charged by the service provider for such service provided or to be provided by him. Explanation 1. - For ....
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.... of tax payable, is equal to the gross amount charged. Explanation 3. - For the removal of doubts, it is hereby declared that the gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service." (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, bet he amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any a....
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....ions (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation. - For the purposes of this section, - (a) ["consideration" includes - (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed; (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.] (c) "gross amount charged" includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liabl....
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....the said advertising fee is nothing but is @4.5% of the amount collected out of weekly gross sales. The royalty @ 8% is also the part of said weekly gross sales and is admittedly taxable. Thus, we are of the opinion that by merely mentioning that for master licensee 33% of all the fees collected shall exclude advertising fee does not takes that amount out of the tax net of the amount received from franchisees for providing them the 'Franchise Service'. Thus the sole reason of this advertisement fee is also the part of the contract value. More so, this value is not at all the expense incurred by the franchise for advertising his own outlet but this is the amount out of his income from the sales passed on to the service provider SSIPL in lieu of the franchise agreement between the two. Hence, we are of the firm opinion that this 'Franchise Advertisement Fund' is despite a different nomenclature of being a different fund but actually is the value received by the appellant for providing franchise service to its franchisees. 8. Coming to the second ingredient it is observed that the appellant/ assessee had submitted that advertising service is not the part of franchise service and that....