TaxTMI 
TaxTMI 
2020 (1) TMI 274
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave entered into Retail Agent Agreements with various retailers for providing licenses for opening shops in its names i.e. Easy Bill Ltd. and have collected the service fee from them. It is alleged that the said service fee is taxable under the category of 'Franchise Service' as defined under Section 65 (47) of the Finance Act, 1944. Alleging that the appellant has evaded payment of service tax on the amount collected by them that 4 different show-cause notices were issued to the appellant. The respective details are as follows: Sr. No. Show Cause Notice No. & Date Period Involved The Amount (Rs.) in Question Appeal No. Order Challenged 1. 9042 24.04.2009 16.06.2005 to 31.03.2008 54,51,428/- 55447/2013 10-13 15.10.2010 2. 389/091385 14.10.2009 01.04.2008 to 31.03.2009 11,00,040/- 50562/2017 116/2016-17 31.10.2016 3. 1689-1693 23.08.2011 01.04.2010 to 31.03.2011 1,65,799/- 50562/2017 116/2016-17 31.10.2016 4. 340/2012-13 21.05.2013 April, 2011 to March, 2012 1,48,44,500/- 50562/2017 116/2016-17 31.10.2016 The recovery of aforesaid amounts alongwith appropriate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tise, marketing techniques or training and standards of quality control except passing on the ownership of all know-how to franchisee; 3. The franchisee is required to pay to the franchisor, directly or indirectly a fee; and 4. The franchisee is under an obligation not to engage in selling or providing similar goods or services of process, identified with any other per [CBE&C. Circular No. 59/8/2003-ST dated 20.06.2003] 5. It is submitted that one-time fee of Rs. 15,000/- as sign up fee to the Appellant is agreed to be paid by the agent as per Section 4.1 of Article 4 of the impugned agreement. Learned DR has also laid emphasis on section 5.1(d) of Article 5 thereof where the agent is restricted to have the control on the Appellant's apparatus/the terminal in this case. Under article 5.2 thereof the agent was made duty bound to allow the company, its affiliates and auditors access to the premises to enable the Appellant to monitor the retail agents' compliance with the agreement and to enable it to accesses its rights or perform its obligations under this agreement. Section 5.6 is also impressed upon which burdens the agent to take all precautions to pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts or services in return for payment. 3. Collins Dictionary defines 'franchise' as a right to sell a company's products in a particular area using the company's name. 9. All these definitions along with the definition given in Finance Act, the conjoint reading thereof, is sufficient for us to form an opinion that the most important characteristics for any service to be called as 'Franchise Service' is the right of representation given by one company to another business company against the consideration paid by the later (franchisee) to the former (franchisor) for the same. Representational right has been defined by the Hon'ble High Court, Delhi in the case of Delhi internal airport Pvt. Ltd. Vs. Union of India 2017(50) S.T.R 275 (Delhi) the meaning thereof in following words : 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. A representational right would mean that a right is available with the franchisee to represent the franchisor. When the Franchisee represents the franc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11. Learned DR has impressed upon these four ingredients to exist so as to suffice a 'Franchise Service' but that argument is not sustainable in the view that the definition characterizing the franchise service with four of these ingredients stands amended. Many of the erstwhile requirement i.e. prior 16.06.2005 for a transaction to constitute 'Franchise' were done away with the amended definition. However, the authorities below are of the opinion that the agreement between the Appellant and its agent because of the contents therein amounts to an agreement as that of franchise service. 12. Now reverting to the facts of this case, specifically, the agreement which is the part of the record (The copy thereof has also been made available by the Counsel for the Appellant and has been acknowledged). Perusal thereof shows that the agreement is titled as " Retail Agent Agreement" which has been executed by the Appellant with an intention to provide an efficient and easily assessable payment collection services for the bill issuers (as defined in the agreement itself) for the collection of the payments from the customers ( who are also defined in the agreement itself), who wish to settl....