2015 (12) TMI 341 - AT - Service Tax

Waiver of pre deposit - franchisee service - Invocation of extended period of limitation - Held that - There is nothing on record to indicate whether limb 4 of the definition of franchise as it stood prior to 16.6.2005 is satisfied and therefore demands up to the period 15.6.2005 prima facie may not be sustainable. As regards the period from 16.6.2005, the ld. Advocate has made out an arguable case that Media was not granted any representational right to provide service or undertake any process identified with franchisee. On the other hand, ld. DR has also made arguable case by pointing out that the service rendered fell in the scope of franchisee service inasmuch as Media got the advertisement in the name of Swagat magazine which is clearly identified by the appellant and thus Media had representational right to collect advertisement for Swagat magazine which is identified with the appellant. Clearly the issue involved is interpretational and therefore the appellant s contention that there was no wilful mis-statement or suppression of fact on their part and they genuinely believed that the amount was not taxable has some merit and as a consequent prima facie extended period may not be invocable. - entire demand prior to 16.6.2005 is prima facie not sustainable, the extended period may also not be invocable and issue is interpretational, we grant stay against recovery subject to pre-deposit - Partial stay granted.

Summary

Issues:
Stay application against service tax demand under franchisee service.

Analysis:
The appellant filed a stay application along with an appeal against an order confirming a service tax demand under franchisee service. The demand was for a significant amount along with interest and penalties. The case involved the publication of a house magazine by the appellant through a publisher, where the magazine was specifically for Indian Airlines/Air India passengers. The adjudicating authority held the amount received from the publisher as chargeable to service tax under franchisee service. The appellant's advocate argued that certain conditions for franchise definition were not satisfied before a specific date and that even after that date, the publisher was not granted any representational right by the appellant, hence service tax was not applicable. The advocate also cited a Supreme Court judgment regarding pre-deposit provisions. On the other hand, the department representative argued that the magazine was clearly identified with the appellant, meeting the franchise definition criteria.

The tribunal considered both sides' contentions. It noted that there was uncertainty regarding the satisfaction of a specific condition before a certain date, making the demand up to that date potentially unsustainable. For the period after that date, the tribunal found that both parties had arguable cases. The appellant's argument of no representational right granted to the publisher conflicted with the department's argument that the service fell under franchisee service due to the magazine's clear identification with the appellant. The tribunal acknowledged the interpretational nature of the issue and the appellant's assertion of no wilful misstatement. It also referenced a High Court ruling regarding pre-deposit provisions. The tribunal ultimately granted a stay against recovery, subject to a pre-deposit amount, considering the prima facie unsustainability of the demand before a specific date and the interpretational nature of the issue. Compliance was required within a set timeframe, failing which the appeal would be dismissed.

In conclusion, the judgment addressed the stay application against a service tax demand under franchisee service. It delved into the arguments presented by both parties regarding the franchise definition, representational rights, and pre-deposit provisions. The tribunal's decision to grant a stay subject to pre-deposit was based on the prima facie unsustainability of the demand for a specific period, the interpretational nature of the issue, and the appellant's compliance obligations.