TaxTMI 
TaxTMI 
2008 (7) TMI 59
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....bove 45 hubs located at various stations in South India. Centered about these hubs its agents running to above 850 collect and deliver time-sensitive letters/articles to the consignees. FEN is headquartered in Chennai and acts as a courier agent with the aid of this network. Articles are transported between the hubs, by FEN. All the agents and FEN are registered as courier agents with the Service Tax department. FEN administers and controls the agents in the network. Franchise service was introduced in the statute with effect from 1-7-2003. After due process of law, in the impugned order, the Commissioner demanded an amount of Rs. 3,64,86,934 as tax towards the service rendered by FEN during 1-7-2003 to 30-9-2006 as franchisors and Rs. 6,26....
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....ents make a deposit with FEN called trade deposit. The agents pay service tax on the charges they collect from their clients, and return the balance after retaining their expenses and their remuneration. FEN does not impart any skill, technical know-how or managerial expertise to the agents. The work involved is like that of a post office. There is no service rendered by FEN to their agents to be taxed under franchise service. Service tax demand is on the corpus which is the net of the same tax and thus the demand is against the principle of taxation. The Commissioner went by the form rather than the substance of the agreement and treated the agreement as one of franchise. The local couriers are required to use consignment notes and station....
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....FEN is for another activity subject to a different category of Service Tax. The demand is in order and deserves to be sustained. He cited the decision of the Tribunal in Jetking Information Ltd v. CCE [2007] 6 STT 444 (Mum. - CESTAT). The facts of that case were that the assessee therein had rendered service under the category of commercial coaching and training and at the same time ran a network of similar coaching centres as a franchisor of the same service. The Tribunal upheld the demand of service tax under the category of "Franchise Service' from the appellant therein. 4. We have carefully considered the rival submissions. The Act defines "Franchise' in section 65(47) as follows: '"Franchise' means an agreement by....
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....6-6-2005 that a franchise provided for payment of a fee by the franchisee to the franchisor. The agents in this case pay the courier charges upfront at a flat rate while collecting consignment notes from the appellant. The agents retain their share of the income as per the tariff. They also get incentive as prescribed based on turnover. They retain their expenses and remuneration and return the balance of income from clients to FEN. No fee is paid to FEN by the agents as per the agreement. From 16-6-2005, the service involves provision of a service associated with a particular person by trade mark, service mark, trade name or logo. The registration certificates issued to the agents carry the endorsement that they are agents of Franch Expres....