2013 (10) TMI 296 - AT - Service Tax

Franchisee Services - Period of limitation applicant was granted representational rights for providing service to more than 100 Centres for consideration - Held that - There was no merit in the contention of the applicant that the demand is time-barred - In respect of the other services, the applicant was providing taxable services for consideration - Therefore, it cannot be said that the services provided to itself and not to the clients - We also point out that in some cases, the applicants collected service tax but they did not pay the same - In these circumstances, the applicant has not made out prima facie case for total waiver of pre-deposit of service tax appellant was directed to submit the pre-deposit upon such submission rest of the duty to be stayed till the disposal Partial stay granted.

Summary

Issues:
1. Waiver of pre-deposit of service tax, interest, and penalties
2. Time-barred demand in respect of Franchisee Service
3. Taxability of services provided to Government departments by a Government undertaking
4. Contesting demand on merits vs. time-bar

Analysis:
1. The applicant sought waiver of pre-deposit of service tax, interest, and penalties amounting to Rs. 1,71,24,449. The demand was confirmed for various taxable services provided by the applicant, including Franchisee Service, Event Management Service, Design Services, Business Support Service, and others. The main demand of Rs. 1.10 crores pertained to Franchisee Service. The applicant argued that the demand for Franchisee Service was time-barred as the activity was disclosed in a statement dated 18.4.2006, prior to the issuance of the show-cause notice in 2011. However, the tribunal found that the applicant had entered into an agreement for providing services to over 100 centers for consideration, and thus, the contention of the demand being time-barred was dismissed.

2. Regarding the taxability of services provided to Government departments by a Government undertaking, the applicant contended that since the services were provided to state departments by a Government undertaking, it cannot be considered as taxable services provided to clients. However, the Revenue argued that the applicant provided services to various clients for consideration, making them liable to pay service tax. The tribunal noted that the services were indeed provided for consideration, and in some cases, service tax was collected but not paid, leading to the conclusion that the applicant did not establish a prima facie case for a total waiver of pre-deposit.

3. The tribunal emphasized that the applicant did not contest the demand for Franchisee Services on merits but only on the grounds of being time-barred. The investigation revealed that the applicant provided services to multiple centers for consideration, indicating tax liability. Consequently, the tribunal directed the applicant to pre-deposit Rs. 1,00,00,000 within eight weeks, with the balance dues waived subject to compliance. The recovery of the waived amount was stayed during the pendency of the appeal.