TaxTMI 
TaxTMI 
2019 (7) TMI 830
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....r purchase, exchange, refurbishing and sale of pre-owned Maruti vehicles. As per the agreement, various obligations are cast upon a dealer and the appellant as per the agreement earns two types of fee (a) Management Fee and (b) Warranty Fee. Management fee received by the appellant on profit sharing basis earned by the appellant on each car i.e. 25% of the profit earned on sale of vehicle will be remitted to the appellant. The appellant also charged fix warrantee fee. The Revenue entertained a view that the Management fee and Warrantee fee are chargeable to service tax under the category of 'Franchise Service'. Therefore, various show cause notices were issued to the appellant and demand was confirmed under the category of 'Franchise Service' for management fee or warrantee fee. Consequently, the penalties were also imposed. Against the said orders, the appellant is before us. 3. The Ld. Counsel for the appellant submits that the licensing agreement between the appellant and the dealers is for sharing of profit in a Co-Venture. It is his submission that the dealers and the appellant have come together to share their resources to run the business of joint venture under the brand ....
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.... the dealer. Further, unlike the arrangement of franchise, in the present scenario, the dealers are asked to represent itself separate from the appellant and therefore it is submitted that it is a co-venture and not a franchise agreement. To support this contention, he relief on the decision of this Tribunal in the case of Mormugao Port Trust v. Commissioner, 2017 (48) STR 69 (Tri.-Mum.) which has been affirmed by the Hon'ble Supreme Court reported in 2018 (19) GSTL J118 (S.C.). He also relied on the decision of Gujarat State Fertilisers and Chemicals vs. CCE, 2016-TIOL-198-SC-ST, Sir Ganga Ram Hospital vs. CCE- 2018-TIOL-352-CESTAT-DEL and M/s PVS Multiplex India Pvt. Ltd. vs. Commissioner of Central Excise, Meerut-I-2017-VIL-961-CESTAT-ALH-ST. 4. He further submitted that in this case, no consideration has been agreed as a fixed fee which is payable to the appellant by the dealer for the purposes of the franchise. Therefore, the appellant are not entitled to pay service tax under the category of Franchise Service. As it is an agreement of profit sharing and it is a joint venture. He further submitted that as per Section 65(47) of the Finance Act, 1994, the franchisee must be g....
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.... Financial Service Authority, 2013 UK 7. 5. He further submitted that the dealers of the appellant after providing repair and replacement of the faulty parts of the vehicle, raises an invoice on the appellant wherein VAT is charged on the part cast and service tax on the labour charges. Therefore, the same do qualified as 'Work Contract Service' as per the decision of Larsen & Toubro Ltd - 2015 -TIOL-187-SC-ST. 6. On the other hand, the Ld. AR supported the impugned orders and submitted that the management fee and warranty fee recovered by the appellant do qualify as 'franchise service' as the appellant has granted representation of right to the franchise and franchise is paying fee to the appellant, therefore, their activity do qualify as 'Franchise Service'. Therefore, they are liable to pay service tax. He further submits that the module adopted by the appellant is very much clear that they are receiving fixed fee from the franchisee, therefore, they are liable to pay service tax. 7. Heard the parties and considered the submissions. 8. The issue involved in the matter is whether the management fee and warranty fee recovered by the appellant is liable to be service ta....
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....e value of car and how to refurbish the car and after the sale of car, the appellant share the profit with the licensee 25% and 75% respectively. Therefore, in the light of the above, it is to be seen that the agreement between the appellant and the licensee is in the nature of franchisee/ franchisor or not? The similar issue has been examined by this Tribunal in the case of Mormugao Port Trust (supra) is joint venture or not? "17. The question that arises for consideration is whether the activity undertaken by a co-venture (partner) for the furtherance of the joint venture (partnership) can be said to be a service rendered by such co-venturer (partner) to the Joint Venture (Partnership). In our view, the answer to this question has to be in the negative inasmuch as whatever the partner does for the furtherance of the business of the partnership, he does so only for advancing his own interest as he has a stake in the success of the venture. There is neither an intention to render a service to the other partners nor is there any consideration fixed as a quid pro quo for any particular service of a partner. All the resources and contribution of a partner enter into a comm....
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....r the benefit so derived. 13. ... Neither can monetary contribution of the individuals that is not attributable to an identifiable activity be deemed to be a consideration that is liable to be taxed merely because a "club or association" is the recipient of that contribution. 14. ... To the extent that any of these collections are directly attributable to an identified activity, such fees or charges will conform to the charging section for taxability and, to the extent that they are not so attributable, provision of a taxable service cannot be imagined or presumed. Recovery of service tax should hang on that very nail. Each category of fee or charge, therefore, needs to be examined severally to determine whether the payments are indeed recompense for a service before ascertaining whether that identified service is taxable." 19. We are accordingly of the view that activities undertaken by a partner/co-venturer for the mutual benefit of the partnership/joint venture cannot be regarded as a service rendered by one person to another for consideration and therefore cannot be taxed." The said order has been confirmed by the Hon'ble Apex Court. 9. Further,....
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....he opinion that the second ingredient has not been established in the present case and the question of service tax does not arise. In view thereof, it is not necessary to go into the question as to whether receiving of HCN through the said common pipeline in the tank which is setup by the GFSC to GACL amounts to 'storage' or not and we leave the said question open." Thereafter, the demand was set-aside. 10. As the agreement between the appellant and the licensee/dealer is in nature of share of profit in the ratio of 25% and 75% and in cases where there is a loss, the appellant does not received any amount towards the activity, in that circumstances, we categorically held that the agreement between the appellant and the dealer is in nature of joint venture for which no service tax is payable by the appellant. 11. Further, we find that a demand of service tax sought to be confirmed on warranty service under the 'Franchise Service'. 12. We find that the appellant has undertaken to provide warrantee service to the customers and receiving the payment through dealers for warranty during the period of warranty. It is like an assurance given by the appellant to the customers th....
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....s (Petitioners) should have been granted representational right by franchisor (AAI). 56. Merely because, by an agreement, a right is conferred on a party to sell or manufacture goods or provide services or undertake a process, would not ipso facto bring the agreement within the ambit of a franchise. What is also required is to establish that the right conferred is a "representational right". 57. The term "representational right" would necessarily qualify all the three possibilities i.e., (i) to sell or manufacture goods, (ii) to provide service, and (iii) undertake any process identified with the franchisor. 58. A representational right would mean that a right is available with the franchisee to represent the franchisor. When the Franchisee represents the franchisor, for all practical purposes, the franchisee loses its individual identity and would be known by the identity of the franchisor. The individual identity of the franchisee is subsumed in the identity of the franchisor. In the case of a franchise, anyone dealing with the franchisee would get an impression as if he were dealing with the franchisor. 68. Further, the taxable service is not ....
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....nformation technology अपील ** (enfra) Ù‡ علام दिलà¥à¤²à¥€-II गॠM Document 2 system and a distinct and unique marketing strategy, all of which developed and owned by the Licenser and which may be changed, improved and further developed by the Licenser. (f) MANUALS: means the operating instruction manual with regard to Maruti True Value business. (g) WORKING CAPITAL: means the inventory norms to be observed by the Licensee as may be prescribed by the Licenser, either in writing or by way of oral instructions, as the case may be. (2) GRANT OF LICENSE For the purpose of the operating the business from the Maruti True Value Outlet, for the term of this agreement: (a) The Licenser hereby grants to the Licensee on non-exclusive basis the right and License to use its proprietary system in connection with setting up and carrying out the business. (b) The Licenser hereby grants to the Licensee on non-exclusive basis the right to use the its trademark and copyright in its logo in relation to the business. (3) OBLIGATIONS OF THE LICENSEE (a) INFRASTRUCTURE ....
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....nd further developed by the Licenser. (f) MANUALS: means the operating instruction manual with regard to Maruti True Value business. (g) WORKING CAPITAL: means the inventory norms to be observed by the Licensee as may be prescribed by the Licenser, either in writing or by way of oral instructions, as the case may be. (2) GRANT OF LICENSE For the purpose of the operating the business from the Maruti True Value Outlet, for the term of this agreement: (a) The Licenser hereby grants to the Licensee on non-exclusive basis the right and License to use its proprietary system in connection with setting up and carrying out the business. (b) The Licenser hereby grants to the Licensee on non-exclusive basis the right to use the its trademark and copyright in its logo in relation to the business. (3) OBLIGATIONS OF THE LICENSEE (a) INFRASTRUCTURE The Licensee shall provide at its costs a suitable space, the infrastructure for refurbishing of a used Maruti vehicle as may be prescribed by the Licenser, the computers and other infrastructure for carrying out the business in accordance with the guidelines of the Licenser and the manuals. The Licen....
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.... The Licensee shall provide free services and/or warranty service as contemplated under this agreement to every Maruti True Value customer, even if a Maruti True Value vehicle has not been sold by the Licensee to such customer. (4) OBLIGATIONS OF THE LICENSEE WITH REGARD TO USE OF THE TRADEMARK AND COPYRIGHT OF THE LICENSER. (a) The Licensee acknowledges that the Licenser is the owner of the trademark and copyright in logo. The Licensee shall not at any time during the period that this agreement is in force or upto expiry thereof or termination of this agreement, do or cause to be done, any act or thing, directly or indirectly, contesting or in any way impairing or tending to impair any part of Licensers' right, title or interest to its trademark and copyright in logo. (b) In connection with its licensed use of the trademark and copyright in logo, the Licensee shall not in any manner represent that it has any ownership interest in the trademark and copyright in logo and the Licensee specifically acknowledge that its licensed use of the trademark and copyright in logo shall not create in Licensee any right, title or interest thereto other than....