TaxTMI 
TaxTMI 
2019 (5) TMI 974
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....undred 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 respondents and were meant only for the students enro....
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....ng 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 openly marketed. v. From the agreement it is evident that what is allowe....
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.... 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 instant case Franchisee is bound to acquire the "Method" and "Equipment" having proprietary marks or logo, meant exclusivel....
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....nd "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 the matter has been decided by the Commissioner dropping the show cause notice holding against inclusion of such charges in the value of taxable service provided he has not rendere....
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....nection 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 respect of applicability nor does it state that goods should have been sold under an independent contract. It is admissible in respect of provider of all categories of taxable services. Since they fulfill the conditions of exe....
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....vice 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. Notification does not talk about dominant nature of contract for allowing the exemption under this notification. All the arguments advanced by the revenue for disallowing the exemption under the said notification. The argument of the revenue that material sold is not the stand....
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....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 Cerebral Learning Solutions P. Ltd., 2013 (32) S.T.R. 379 (Tri.-Del.) which held that Notification 12/2003-S.T., dated 20-6-2003 exempts service tax on so much of the value of taxable service as is equal to the value of the goods and materials sold by the service provider to the respondent of servic....