TaxTMI 
TaxTMI 
2019 (5) TMI 974
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....es Forty Four Lakh Thirty Two Thousand Five Hundred and Eighty Three Only) as detailed in the Show Cause Cum Demand Notice issued to M/s Eurokids International Lt6 (now known as M/s Eurokids International Pvt Ltd.), with consequential relief, if any." 1.2 Against this order of the Commissioner revenue has filed this appeal. Respondents have filed cross objections in the matter. 2.1 Respondents herein are registered with the Service Tax Commissionerate and are engaged providing "Franchisee Services" as defined under the Finance act, 1994. 2.2 On scrutiny of the records, returns and other documents of the respondent, it was observed that they were paying service tax on Franchisee/ Royalty Charges but did not pay the tax on sale of books, admission kit, curriculum and "other income/ miscellaneous income" etc. In opinion of revenue, the admission kits, books, toys, games, brochure, sale of curriculum or any other material supplied by the Franchisor to the Franchisee were the integral part of the service. The franchisee was required to purchase course material from the "Franchisor" for further supply to students. This course material and equipments were tailor made by the respo....
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.... ii. It is an admitted fact that the respondents are providing franchisee service, and in consideration for the service provided franchisee was required to pay Franchisee Fee to Eurokids under the Franchise Agreement. The services under Franchisee agreement has been provided from 2010-11 to 2014-15 and are being currently also provided. iii. Commissioner has not examined the complete Franchise Agreement along with Annexures and has also not taken into consideration the changes in definition of Franchise under Section 65(47) of the Finance Act, 1994 {wef 16.06.2005] and the Valuation of Taxable Services for Charging Service Tax Section 67 of the Finance Act, 1994. iv. As per the agreement "the (Method) admission kits, toys, games Brochure, sale of curriculum or any other material supplied by the Franchisor to the Franchisee were the integral part of the service. The franchisee had to purchase course material from the Franchisor only on payment of certain price for further supply to the student. This course material and equipment were prepared by the franchisor (respondent) and was exclusively only for the students enrolled in their school. This material was not....
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.... is required to be included in the taxable value. x. Commissioner has failed to appreciate the evidence available in the various clauses in the Franchise Agreement and the fact that respondent has intentionally bifurcated/ segregated the Gross Fee charged to the Franchisee in their Balance Sheet, Profit and Loss Account to misguide and evade discharging their Service Tax liability. xi. Notwithstanding the distinctness of the transaction of the supply of study materials and equipments and collection of the value thereof, the materials and equipments being integral to the taxable service. "Franchise", the value of materials and equipments supplied to the children should be included in the gross value of the service rendered and the respondents claim to exemption under Notification No 12/2003-ST is misconceived. Commissioner has erred and has not appreciated the fact that these educational material and equipments are not standard text books and kits which are freely available in the market and are the part of prescribed curriculum/ syllabus recommended by any statutory body and that the same are only made available to the children enrolled with Eurokids. In the insta....
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..../2003-ST as claimed by the Respondent and allowed to them by the Commissioner would not be admissible to them as the "Method". "Equipments", "Books", "Dresses", "Toys' and "Admission Kit" supplied by the respondents to their franchisees are integrally part of the franchisee services provided by them under a single contract term as "Franchisee Agreement". Further the Respondents have full control over the material supplied by them to franchisee and the said material could only be used for providing the taxable service under the said category. Hence the looking from the issue of dominant nature of contract, the agreement is for providing the "Franchisee Service" and the entire amount of consideration i.e. gross received towards the said agreement should the value of taxable service provided by the respondents. vii. Benefit under exemption notification No 12/2003-ST will not be applicable in the present case as the goods are not being sold separately under a separate contract. The case laws relied upon by the respondent and agreed to by the Commissioner will not be applicable as all the case laws are in respect of services other than "Franchisee Service". viii. Since....
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....f welcome kits sold will not match the number of students admitted. These welcome kits are also not the part of franchise agreement. These kits are supplied purely on sale basis without having any connection with the service provided. Against the sale of these kits invoices are raised and VAT paid. iv. The sale of equipments and welcome kits constitute about 85% of their sale turnover and they have paid VAT on these sales. These do not form the part of taxable service. v. The second and a limited one is dealing with the aspects of distributors. They sell different books which are Comics etc of Art Attack 3 in N, Disney Memorable Movie 4 in , Look N Color, Sicker Story Book N Biyton, Barbie Story Book, My very First Ency New etc. In exceptional case they also supply these books directly at concessional rate. vi. The value on account of sale of different books through the respondent distributors etc, account for about 15% to 20% of Respondents Sale of Products exempt from payment of VAT. These cannot be part of the taxable value. vii. Further wording of the Notification 12/2003-ST are very clear and unambiguous and do not put any restrictions in re....
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....on 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts so much of the value of all the taxable services, as is equal to the value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under section (66) of the said Act, subject to condition that there is documentary proof specifically indicating the value of the said goods and materials. 2. This notification shall come into force on the 1st day of July, 2003." 5.3 From plain reading of the said notification it is quite value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under section (66) of the said Act, subject to condition that there is documentary proof specifically indicating the value of value of the said good and materials. The exemption granted is unconditional and is not circumscribed by any conditions as sought to be argued by the revenue in their appeal. There is no requirement in the notification that the supply of the goods/ materials should be under a separate contract. Not....
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....nder receipts and is towards expenses such as textbooks, uniform, medical check-up, insurance, etc. Unspent amounts are returned to the students. The ld. counsel also showed from the appeal papers the details of the amounts returned to the students. We agree with the reliance placed in the case of Intercontinental Consultant & Technocrats P. Ltd., 2013 (29) S.T.R. 9 in which the Delhi High Court held that amounts recovered towards expenses cannot form part of the value of the service. Similar is the case relating to charges for re-examination fees which is an activity post the coaching training and is an expense recovered from the students. Accordingly, we hold that these charges are not includible in the value of the service. 9. The student deposit fund is collected as a refundable security deposit to meet unforeseen expenses. As long as these expenses are specifically charged to the students the same cannot be included in the value of service applying the above ratio. 10. We also find that the amount collected towards sale of forms, prospectus will not be includible in the value on which service tax is demanded relying on the Tribunal's judgment in the case of C....
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....5.5 years under the name of 'EuroKids', through its various franchisees. These pre-schools include playschools, nursery classes and kindergarten known as Euro Junior and Euro Senior classes. They were the owner of the trademark 'EuroKids' - and its variant marks. Over the years, they had invested a significant amount of time and money in building and promoting its brand(s) and its business activities. Their business was through a franchise arrangement between EuroKids, the assessee and its franchisee (Franchise Agreement), in terms of which the franchisee provides, inter alia, the following services to students : • • Conduct and carry out EuroKids Pre-School, Impart curriculum provided by EuroKids, Use of proprietary intellectual property rights (including proprietary materials) of EuroKids strictly in accordance with the Franchise Agreement. Under the Franchise Agreement, it was the franchisee that provides the services to students and had an obligation to maintain and impart curriculum provided by EuroKids to the students. The Franchisee had further obligations in terms of the manner in which the pre-school was to be ....
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....n kits sold to the said Franchisees and the number of admission kits sold were different from the number of students in a school which This further substantiates that sale of admission kits was not integral to the provision of service. 20.4 I find from the records that Assessee are providing Services as well as are selling Goods. They are charging a fixed amount as Franchisee Fees to Franchisees per annum. In addition they are charging Royalty @ 18% to 20% on the Fees paid by the Students to the Franchisee. The facts are not under dispute that the Assessee is raising separate Invoices for these on the Franchisees and are paying Service Tax on the same. The Show Cause Notice also does not dispute these facts. 20.5 In addition it is observed that the Assessee is raising separate Bills or Invoices on Franchisee for the sale of equipment and sale of Welcome Kits. Along with their written submissions, Assessee had enclosed copy of one such Invoice raised separately for the supply of equipments; Welcome Kits etc. on Franchisee. The Equipment basically consisted of different play materials, games, toys etc. and the Welcome Kits consisted of T-S....
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....oned, amongst others in addition, quantity in pcs., Rate per pcs. Discount (of 50%), Amount, VAT rate @5% to @ 12.5%. These products were basically Toys and games of generic in nature. These included amongst others Toys of 10 Shaped Insets (Knobbed); Alphabet Train Puzzle (C&S Letters); Carving Alphabet Set (Small Letters); Happy Puzzles-Truck (9Pcs); Number Train Puzzle (1 to 20); Sand Paper Alphabet Small Letters; Shapes Beads; Sound Box; Magnetic Button (Set of Four); Magnetic Eraser; Square Pyramid; Table Top Magnetic Easel Board (Folding); Zig-Zag Balancing Beam 10Ft. Long; Climbing and Swinging Rope etc. • 20.8 In addition to M/s. Vardhaman I.Q. Toys Pvt. Ltd., the assessee procured the Equipments also from M/s. Koolkidz Products Ltd., Sethia House, 4th Floor, 23/24 Radha Bazar Street, Kolkata - 700 001. These were mostly play material for kids. These products were basically Toys and games of generic in nature. These included amongst others Cozy Cottage; Mountain Climber; Mini Cycle; Hide & Slide Climber; Little Maker Drum; Little Roadster; Police Car; Ride & Rescue; Super Chef Kitchen; Whale ....
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....y to Anand Deep Enterprises, Coimbatore on behalf of Ms. Archana Dange one of the Franchisee of the Assessee i.e. Eurokids Kaveri. The Invoice for these were raised on Assessee. The Invoice gave details of Quantity, Rate, Amount, VAT@5% and @.5% etc. 20.13 The Assessee placed Purchase Order for the supply of Tiffin Box and Water Bottle with M/s. Cello World, Sr. No. 666/3 & 4, Opp. Kachigam Sub Station, Village Dabhel, Daman (U.T.). These were supplied to the Assessee under an Invoice, that gave details of Product Name, Quantity, Rate, Trade Discount, Schemes, Amount etc. 20.14 These and other similar products were stated to have been sold by the assessee to their Franchisees under their Bills/Invoices (by adding their margin) on payment of VAT/CST as the case may be. The invoices raised by them show separately the Description of the goods, quantity, price, total value and amount of VAT involved in it. 20.15 These and other similar documents reflect that these are purely sale of goods. Separate Invoice is raised for the sale of these goods. The goods are generic in nature and are available freely in the open market. 20.16 In addition to ....
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....m\httpdocs\python_image_text_project\google\google_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 6 separate Invoice on payment of VAT/CST at the applicable rate. Books were sold to different distributors again under separate Invoice. Books were exempted from payment of VAT/CST. 20.24 It has been held in several Judgements that on the value of the goods sold separately No Service Tax is payable and the same cannot become part of the value of Service. Some of the Judgements are discussed below: - (a) Hon'ble CESTAT in the case of M/s Tirupati Cylinders Ltd Vs Commissioner of Central Excise, Meerut-I-2016-TIOL-316-CESTAT-ALL held that: "The appellant also relies on the Hon'ble Allahabad High Court in the case of CCE and CE Vs. Balaji Tirupati Enterprises 2013 (32) STR 530 (All) wherein under the repair and maintenance service, goods were used and deemed to be sold. It was held that the same are not in the purview of Levy/service tax. As such, goods are deemed to be sold under the contract. The Id. Counsel also relies on the ruling of the South ....
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.... the party has specifically mentioned the cost of items supplied/sold and there is documentary proof specifically indicating value of the goods. In this situation in view of the Notification No. 12/2003-ST dated 20.6.2003 and Hon'ble Supreme Court decision in the case of Commissioner Vs,. Jain Brothers -2012 (28) STR 162 (SC) demand of Service Tax against the party for the cost of goods supplied during repair does not appear sustainable. Therefore, the Board is of the view that in the overall facts and circumstances of the case, no purpose would be served in pursuing SLP in the matter." ་ 6.3 He further urges that in view of the fact that Board have accepted the legal position and have not filed further appeal in the matter, the appeal is fit to be allowed. 7. Heard learned DR, who supports the impugned order. On query from the Bench, as regards the matter has been settled in view of the Board's letter dated 27.9.2013, the learned DR submits that the Tribunal may pass appropriate order. 8. Having considered the rival contentions and in view of the settled legal position in the case of Samtech Industries (supra), upholding ....
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....short question for consideration is whether the cost of goods supplied while rendering a service can be subjected to levy of service tax. The issue has been settled by the larger bench of the Tribunal in the case of Hindustan Aeronautics Ltd. (supra) (d) which has considered all the relevant decisions and has come to the conclusion that there cannot be a service tax levy on supply of goods. Respectfully following the said decision in the present case also, we are of the prima facie view that the cost of goods supplied while rendering a repair service cannot be subjected to levy of service tax".(Emphasis Supplied). Hon'ble CESTAT in the case of M/s CSC Computer Education (P) Ltd Vs Commissioner of Service Tax, Chennai, 2014-TIOL-569-CESTAT-MAD. held that: "it is already decided by the Tribunal in the following case that the exemption Notification 12/2003-ST cannot be denied by any executive instructions instructing that the exemption will apply only in respect of standard textbooks sold. (i) M/s. Cerebral Learning Solutions Pvt. Ltd. Vs Commissioner of Central Excise, Indore reported in = 2013-TIOL-834-CESTAT-DEL. (ii) M/s. Da....