TaxTMI 
TaxTMI 
2019 (7) TMI 830
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....le 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 name of 'Maruti True Value' (MTV). Both the....
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....t 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 granted a representational right to sell or ma....
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.... 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 tax in terms of Section 65, (105), (zze) of the Fina....
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....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 common pool of resource required for running the joint enterprise and if such an enterprise is successful the par....
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....iable 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, we find that the issue was also examined by the Hon'ble Apex Court in the case of Gujarat State Fertilisers and Chemicals (supra) wherein the Hon'b....
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....essary 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 that during the period of warranty, if any, defect arises the same will be make good without any fees. The said activity cannot be termed as 'Franchise Service' and sam....