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2016 (6) TMI 1107 - AT - Service TaxWaiver of pre-deposit - Franchise Service - appellant gave right to use its name for running pre-primary and preparatory schools - scope of the definition of Franchise given in Section 65(47) of the Finance Act, 1994 during the relevant period - it was contended that as per one of the condition during the relevant period, franchisee was under an obligation not to engage in selling or providing similar goods or services or process identified with any other person - Held that - As is seen the demand pertains to the period 1.4.2004 to 15.6.2005 when condition No.IV in the definition of franchise given in Section 65(47) ibid was very much in existence and prima facie is not satisfied. Consequently, in view of precedent CESTAT judgement in the case Saanj and Savera Educational Welfare Trust vs. C.S.T., Delhi 2015 (10) TMI 1053 - CESTAT NEW DELHI , appellant has made out a strong case for full waiver of pre-deposit - stay granted.
Issues:
1. Service tax demand under Franchise Service for the period 1.4.2004 to 15.6.2005. 2. Interpretation of the definition of "Franchise" under Section 65(47) of the Finance Act, 1994. 3. Comparison of the present case with the precedent set by the CESTAT judgment in Saanj and Savera Educational Welfare Trust vs. C.S.T., Delhi. Analysis: The appellant filed a stay application and appeal against the Order-in-Appeal confirming a service tax demand under Franchise Service for the period 1.4.2004 to 15.6.2005. The appellant contended that the franchise agreement allowed the use of its name for schools, similar to a case where the CESTAT set aside a demand due to non-satisfaction of a specific condition in the definition of "Franchise." The Revenue supported the impugned order, leading to a detailed analysis by the Tribunal. Upon considering the contentions and records, the Tribunal referred to the precedent judgment in Saanj and Savera Educational Welfare Trust vs. C.S.T., Delhi, where the condition in the franchise agreement was crucial. The Tribunal highlighted the specific condition in the present agreement, emphasizing that the franchisee was only restricted from opening a school with the same name in the existing premises, allowing freedom to open elsewhere. This analysis led to the conclusion that the agreement did not fall under the category of a franchise agreement as defined under Section 65(47) prior to 16.6.2005. Further, the Tribunal referenced the judgment in Dewsoft Overseas Pvt. Ltd. Vs. CST, New Delhi, emphasizing that for service tax under the franchise agreement, the burden of proof lies with the Revenue to establish the agreement's nature. Consequently, the Tribunal allowed the appeal, ruling that no service tax was leviable under Franchise Service before 16.6.2005, setting aside the demand, interest, and penalty for the period before this date. Considering the demand period from 1.4.2004 to 15.6.2005, where the condition IV of the franchise definition was in existence, the Tribunal found it prima facie unsatisfied. Citing the precedent judgment in Saanj and Savera Educational Welfare Trust case, the Tribunal granted a full waiver of pre-deposit, ordering the stay of recovery of the liability during the appeal's pendency. The decision was based on the non-satisfaction of the specific condition in the franchise agreement, aligning with the interpretation of the franchise definition under the Finance Act, 1994.
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