2016 (5) TMI 450 - AT - Service Tax

Waiver of pre-deposit - Demand of service tax along with interest and penalty - Franchise services - Consideration received by the applicant from the various accredited registrars of domain names - Applicant prays that they are not covered by the franchise services as they do not permit any other person to represent them in any of their rights..IN domain name does not belong to them and they are only managing the allocation of various domain names with this top level domain. Held that - the applicant may not fall under the category of franchiser (Section 65 (48)). The applicant is not holding exclusive rights or ownership of domain name so that he can be made liable for giving representational right for consideration. The domain.IN is the Government of India s right and that the appellant claims arising in terms of clear agreement. The impugned order does not throw light on how the applicant can be said to have provided representational right when the domian name is not exclusively owned or controlled by the applicant. It is found that the decision of the Tribunal in Directi Internet Solutions Pvt. Ltd. VS. CST Mumbai 2014 (8) TMI 591 - CESTAT MUMBAI prima facie applies to the present case also. - Waiver granted

Summary

Issues:
Waiver of pre-deposit of adjudicated tax demand regarding franchise services.

Analysis:
The case involves a company incorporated in 2003, providing efficient interconnectivity for internet operations and managing domain names under the.IN registry. The revenue claimed that the company was providing franchise services, leading to a service tax demand of ?6,54,79,758. The company argued that they do not grant representational rights to others, emphasizing that the domain.IN belongs to the Government of India, and they merely manage domain name allocation through accredited registrars. The company cited a Tribunal decision in a similar case to support their argument, where it was held that such activities do not constitute franchise services. The revenue contended that the company's agreement clearly indicated they were providing registrar services and assigning domain names, making them liable for service tax under the franchise services category.

Upon hearing both sides and examining the records, the Tribunal found that the definition of "franchise" under section 65(47) did not apply to the company's case. The Tribunal noted that the company did not have exclusive rights or ownership of the domain name.IN to grant representational rights for consideration. As the domain.IN belonged to the Government of India, the Tribunal concluded that the company did not provide representational rights. Additionally, the Tribunal found that a previous decision regarding similar activities supported the company's position. Consequently, the Tribunal held that the company had established a case for the waiver of pre-deposit of adjudicated dues until the appeal's disposal. The Tribunal ordered the waiver accordingly.