2021 (2) TMI 698 - HC - GST

Profiteering - Franchisor services - vires of Section 171 of the Central Goods and Services Tax Act 2017 (CGST Act) and Rules 126 128 and 133 of the Central Goods and Services Tax Rules 2017 - HELD THAT - The counsel for the petitioner to before the next date of hearing place before this Court the agreement / arrangement of the petitioner if any with the foreign company which is entitled to the trade mark SUBWAY and / or showing the authority under which the petitioner is issuing franchises in India. The petitioner to also place before this Court before the next date a sample agreement entered into by the petitioner with the franchises / sub-franchises in India if they are all the same and / or be prepared to make a statement to the said effect before this Court. List on 15th February 2021.

Summary

Issues:
1. Challenge to provisions of Section 171 of the CGST Act and Rules 126, 128, and 133 of the CGST Rules.
2. Liability of franchisor for anti-profiteering concerning over 500 franchises in India.

Analysis:
Issue 1:
The judgment pertains to a challenge against the provisions of Section 171 of the Central Goods and Services Tax Act, 2017, and Rules 126, 128, and 133 of the Central Goods and Services Tax Rules, 2017. The court noted that the challenge is currently at the notice stage. Consequently, the court issued a notice regarding the challenge, which was accepted by the counsel for the respondents. The petitioner's counsel argued that as the franchisor, the petitioner cannot be held liable for anti-profiteering concerning over 500 franchises in India. The court directed the petitioner to submit the agreement with the foreign company holding the trademark 'SUBWAY' and the authority under which franchises are issued in India. Additionally, the petitioner was instructed to provide a sample agreement with the franchises/sub-franchises in India or make a statement to that effect before the next hearing scheduled for 15th February 2021.

Issue 2:
The second issue revolves around the liability of the franchisor for anti-profiteering activities related to numerous franchises in India. The petitioner contended that inquiries from the petitioner should not extend to all the over 500 franchises in the country. The court directed the petitioner to present relevant agreements and arrangements with the foreign company holding the trademark and the authority under which franchises are granted in India. This directive aimed to clarify the franchisor's role and responsibilities concerning the franchises. The court's decision to list the matter for the next hearing indicates the importance of establishing the legal framework and agreements governing the franchisor-franchisee relationships to determine liability accurately.