2015 (12) TMI 159 - AT - Service Tax

Demand of service tax - Franchisee service - use of logo / trade mark - joint venture to run buses in the city - Held that - AMT is nothing but the name of service provided and the noticee has permitted i.e given representational right to use name AMT i.e logo on the city buses to be run by M/s APMSS. Providing of the service of use of name AMT on city buses by M/s APMSS is nothing but a service mark/logo, trade name and slogan which is covered under Franchise Service falling under Section 65(47) of Finance Act, 1994 and chargeable to Service Tax under section 65(105)(zze) of Finance Act, 1994 w.e.f 01.07.2003. We have seen the conditions of the Agreement between the appellant and APMSS as extracted in the adjudication order. We find that it clear reflects to a joint venture to run buses in the city. Even the logo is to be decided by both parties. There is no relationship of franchisor and franchisee. We did not find any representational right having been granted by appellant to APMSS to provide any service identified with the franchisor. - Decided against Revenue.

Summary

Issues:
1. Interpretation of the term "Franchise Service" under section 65(47) of the Finance Act, 1994.
2. Determination of whether the agreement between the parties constitutes a franchisor-franchisee relationship or a joint venture.
3. Assessment of liability for Service Tax on the appellant.

Analysis:
1. The case revolves around the definition of "Franchise Service" as per section 65(47) of the Finance Act, 1994. The appellant allowed another party to use the logo 'AMT' on city buses in exchange for a royalty payment. The Revenue contended that Service Tax was payable under the category of "Franchise Service." However, the Commissioner (Appeals) held that the relationship did not fit the definition of a franchisor-franchisee arrangement but rather constituted a joint venture. The key issue was whether the agreement granted representational rights as required by the law.

2. The adjudicating authority based its demand for Service Tax on the premise that the appellant permitted the use of the name 'AMT' as a service mark/logo, trade name, or slogan, thus falling under Franchise Service. However, upon reviewing the conditions of the agreement, it was evident that the arrangement was a joint venture to operate buses in the city, with both parties having a say in decisions such as the logo. The Tribunal concurred with the Commissioner (Appeals) that no representational rights were granted by the appellant to the other party for providing services associated with the appellant, thereby negating the franchisor-franchisee relationship.

3. Ultimately, the Tribunal upheld the Commissioner (Appeals) decision, dismissing the Revenue's appeal. The judgment clarified that for an agreement to be classified as a franchise under section 65(47), there must be a clear grant of representational rights for selling, manufacturing, providing services, or undertaking processes identified with the franchisor. Since such rights were not established in this case, the demand for Service Tax was deemed unwarranted, and the relationship was deemed a joint venture rather than a franchise arrangement.

This detailed analysis of the judgment highlights the key legal issues, the arguments presented by both sides, and the Tribunal's reasoning in arriving at the final decision.