2010 (9) TMI 654 - AT - Service Tax

Waiver of pre-deposit - The original show-cause notice invoked the definition of Franchise as given under Section 65(47) as amended w.e.f. 16-6-2005 - The original authority held that the transaction did not fall within the ambit of the definition of franchise - The revisionary authority, both in its show-cause notice and in its order, chose to press into service the erstwhile definition of franchise under Section 65(47), which was in force prior to 16-6-2005 - Show-cause notice issued by the revisionary authority under Section 84 is not permitted to travel beyond the scope of the original show-cause notice issued to the assessee - Agreement is that the Institute could not utilize the name or logo of Client or even of the Joint Venture in any materials, advertisements, hoardings, name boards or letter heads, without prior and written approval from Client - The Institute should be considered to have obtained a representational right from Client to provide training/coaching to the candidates - Hence, grant waiver of pre-deposit and stay of recovery.

Summary

Issues:
1. Waiver of pre-deposit and stay of recovery in a Service Tax case.
2. Interpretation of the definition of "franchise" under Section 65(47) of the Finance Act, 1994.
3. Analysis of the agreement between the parties to determine tax liability.

Detailed Analysis:

1. The appellant sought waiver of pre-deposit and stay of recovery concerning Service Tax and penalties determined by the Commissioner under Section 84 of the Finance Act, 1994. The demand was for the period from May to November, 2006. The original authority dropped the proposals raised in the show cause notice, but the Commissioner revised the order based on a different interpretation, leading to the demand of tax and penalties.

2. The crux of the issue revolved around the interpretation of the definition of "franchise" under Section 65(47) of the Finance Act, 1994. The original show cause notice invoked the definition post an amendment on 16-6-2005, while the revisionary authority relied on the definition in force before this date. The amended definition simplified the requirements for a transaction to be considered a franchise, focusing on granting representational rights to provide services identified with the franchisor.

3. Examining the agreement between the parties dated 20-5-2006, it was found that the appellant was responsible for prescribing the syllabus, conducting final examinations, and certifying successful candidates. The Institute's role included conducting courses, internal examinations, training students, and maintaining records. The revenue's demand was based on the 20% share received by the appellant from fees collected. Notably, the agreement prohibited the Institute from using the appellant's name or logo without prior approval, which the Commissioner misinterpreted as granting representational rights.

In conclusion, the tribunal found in favor of the appellant, granting waiver of pre-deposit and stay of recovery for Service Tax and penalties. The judgment highlighted the importance of adhering to the scope of the original show cause notice and correctly interpreting legal definitions to determine tax liabilities in such cases.