TaxTMI 
TaxTMI 
2024 (12) TMI 353
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....nchise Service, Maintenance or Repair, Training and Coaching etc; it was observed that the appellant made payments to M/s Aircom International, U.K in the form of license fee, support and maintenance charges, training fee, management fee, out of pocket expenses, salary and wages, consultancy, repair and maintenance etc; it was also noticed that the appellant has availed inadmissible credit of Rs.3,90,743/- on invoices received at the premises which is not registered. On conclusion of investigation, two Show Cause Notices dated 15.10.2009, covering the financial years 2003-04 to 2007-08, demanding service tax of Rs.1,16,53,293/- and inadmissible CENVAT of Rs.3,90,743/- and Show Cause Notice dated 24.02.2010, covering the period 2008-09, demanding service tax of Rs.2,81,94,672/- were issued to the appellants; the proposals in the Show Cause Notice were confirmed by the impugned order vide which Rs.72,34,265/- and Rs.3,90,743/- paid by the appellants has been appropriated. 3. Shri Atul Gupta, learned Consultant for the appellant submits that the transaction involved in the case is with reference to the license given by the parent company for using their software to the appellant unde....
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....* National Internet Exchange 27.07.2018-(CESTAT New Delhi) Final order 52638/2018 dated * Circular No. 59/8/2003-ST dated 20 June 2003 5. As regards the demand under the Maintenance or Repair Service, learned Consultant submits that in terms of Part A of Schedule 1 of the Agreement, the fee payable to the licensor i.e parent company in U.K. comprises of fees payable by the customer for any lease/ rental/ license of the software, for provision of support, maintenance and technical support; Part B of Schedule 1 clearly specifies that in case the overseas entity provides any technical support that will be billed separately; while journalizing the accounts, the appellant has booked both 45% of the amount received towards support and maintenance as well as amount payable towards support services under the same Head. Normally, maintenance service is provided by the appellant to their customers; when the issues arise in respect of basic designing, the parent company provides assistance; however, the consideration for the same is already included in the charge payable to the parent company i.e. 45% of the gross revenue. 6. Regarding the demand with respect to Training and Coaching Serv....
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....ioner instead of appropriating the confirmed amount of Rs.44,19,028/-, again confirmed duty of Rs.48,67,133/-; learned adjudicating authority appropriated the same amount while confirming the demand of Rs.23,67,132/- already paid over and above Rs.48,67,133/-, confirmed and appropriated Rs.48,67,133/- again; thus, there was excess demand and confirmation. Learned Consultant submits that the service tax was computed at an average rate of 12.36% whereas different rates like 12%, 12% and 10% were applicable during the periods 18.04.2006 to 31.05.2007, 01.06.2007 to 23.02.2009 and from 24.02.2009 onwards respectively. 10. Learned Consultant for the appellants further submits that the second Show Cause Noticefor the period 2008-09 was vague and was issued without mentioning any specific Head or category of the services alleged to have been provided by the appellant and the remuneration thereof; learned Consultant submits that demand was computed on same expenses two-three times on the same expenses; he submits that such a Show Cause Notice cannot be sustained as held in the following cases: * Brindavan Beverages Pvt. Ltd. - 2007 (213) ELT 487 (SC) * Shubham Electricals - 2015 (40) ....
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....harter v. Commissioner of Central Tax (Appeals - II), Delhi Final Order no. 51662/2023 dated 13 December 2023 in ST/52064/2018 (Delhi CESTAT) * Pushpam Pharmaceutical Co. v. Commissioner of Central Excise, Bombay, cited in 1998 (78) ELT 401 (SC) * Anand Nishikawa Company Ltd. v. Commissioner of Central Excise, reported in 2005 (188) ELT 149 (SC) * Uniworth Textile Limited v. Commissioner of Central Excise, Raipur, cited in 2013 (288) ELT 161 (SC) * Continental Foundation Joint Venture Holding vs. Commissioner of Central Excise, Chandigarh-l, reported in 2007 (216) E.L.Τ. 177 (SC) * Bharat Hotels Limited vs. Commissioner of Central Excise (Adjudication), cited in 2018 (12) GSTL 368 (Del.) * Telephone Nigam Ltd. vs. Union of India and others - W.P. (C) 7542 of 2018 decided on 06.04.2023 (Delhi High Court) * M/s G.D. Goenka Private Limited vs. The Commissioner of Central Goods and Service Tax, Delhi South Service Tax Appeal No. 51787 of 2022 dated 21.08.2023 (Delhi CESTAT) 12. Learned Consultant lastly submits that as there is no suppression with intent to evade payment of duty, penalty under Section 78 is not tenable; moreover, learned Commissioner have imposed pen....
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....e Revenue as payment for Franchise Service availed by them from their parent company. Learned Commissioner finds that as payment for Franchise Service availed by them from their parent company. Learned Commissioner finds that: 55. A.3 As per agreement dated 01.04.2005 between M/s Aircom International Company, UKand the Noticee has, ITP (Information Technology Product) charges are payable to Aircom International, UK (parent company) at the rate of 45% of the total sale value of software, further 20% of total sale value of training booked by the business unit, software development is charged back to the parent company Further M/s Aircom International, UK granted the representational right to the Noticee including right to sell their software, use their trade mark, service mark, trade name and logo", Aircom International Company, UK provides the concept of business operation such as managerial expertise and training; Further Aircom International India is wholly owned subsidiary company of Aircom International, UK. Such the conditions under franchise agreement are fulfilled by the Noticee, that the amount pending remittances shown as license fee in the balance sheet covered under fra....
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....various clauses of the agreement, it is understood that the appellant is not seen as a representative of Aircom International Company, U.K; no representative rights have been given to the appellant; the independent existence of the appellant is manifest by various agreement they have entered into with Indian customers. Mere granting of right to distribute sub- license, copy right products of Aircom International Company, U.K; it does not make the appellant a Franchisee of Aircom International Company U.K. We find that this Bench in the case of Reckitt Benckiser India Ltd. (supra) held that : 42. This apart, in a 'franchisee' agreement, the franchisor has the authority to exert a significant degree of control over the method of operation of the franchisee. The agreement executed between the parties in the instant Appeal clearly shows that the licensor does not have any significant control over the manner in which the Appellant conducts its operation. The Appellant is free to procure the raw materials as per its will and it has a right to fix the selling price of the final product. It is also free to run its business, marketing, distribution, sourcing and other activities as per it....
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....anchise disclosure statement under the 'Franchise Rule' amounted to violate of unfair Trade Practice; (ii) Whether the franchisor has authority to exert a significant degree of control over the franchisee's method of operation or provide a significant assistance in the franchisee's method of operation? and (iii) Whether the franchisor must pay a certain amount after the franchise business begins? 44. There was no dispute about the first requirement as the agreement did involve sale or distribution of goods associated with the trademark of the plaintiff. In regard to the second and third requirement, the Court found that from a perusal of the agreement it was reasonable to conclude that Englert exercised control over the defendants only in regard to a single product line and that Englert did not have the ability to control any of the product of the defendant other than LeafGuard gutters which was one of the multiple products and services provided by the defendants. The level of control exerted by Englert over the defendant's method of operation was, therefore, not "significant" for the purpose of the FTC Franchise Rule and so the agreement between the parties was not 'franchis....
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....n the appellants on the Franchise Service alleged to have been availed by them. 20. Coming to the demand on the Head of "Maintenance or Repair Service", the appellant submits that as per Part A of the Schedule 1 to the Contact, the fee payable to the licensor includes fee for the license of the software, the fee payable by the customer for the support and maintenance and fee payable by the customer for the technical support by the licensee; Part B of Schedule 1 specifies that Aircom International Company U.K. shall be entitled to invoice the appellant for the cost of providing any technical support. From this, it is clear that whenever Aircom International Company U.K has provided technical support, the appellant is required to raise an invoice and Aircom International Company U.K. pays for the same; the appellant pleads that charges for such support service are already included in the 45% and the 20% payable to Aircom International Company U.K; therefore, the same cannot be treated as provision of any service by Aircom International Company U.K. to the appellant for which they have to pay service tax on Reverse Charge Mechanism; it is immaterial that the appellant treats the same....
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....here was no material brought on record to show that the respondents had any role to play in such matters as alleged. Even the show cause notice did not refer to any particular material to come to such a conclusion. Therefore, the Commissioner and the CEGAT were justified in holding that the respondents were entitled to the benefits. 9. We find that in the show cause notice there was nothing specific as to the role of the respondents, if any. The arrangements as alleged have not been shown to be within the knowledge or at the behest or with the connivance of the respondents. Independent arrangements were entered into by the respondents with the franchise holder. On a perusal of the show cause notice the stand of the respondents clearly gets established. 10. There is no allegation of the respondents being parties to any arrangement. In any event, no material in that regard was placed on record. The show cause notice is the foundation on which the department has to build up its case. If the allegations in the show cause notice are not specific and are on the contrary vague, lack details and/or unintelligible that is sufficient to hold that the noticee was not given proper opportun....