2012 (8) TMI 372 - HC - Service Tax

Franchise service waiver of pre-deposit - petitioner is a Society established solely for educational purposes - Anti Evasion Wing of Central Excise Division, Ajmer, revealed that the petitioner was engaged in providing franchise service to various parties/schools Held that - Agreement entered into between the petitioner and other four schools, it is revealed that the petitioner not only permitted, allowed and granted a revokable license to these schools to use the name Mayoor School , its logo and moto, but in consideration of the grant of said license - this collaboration fees was nothing but the franchise fees and it clearly fell in the net of service tax - writ petition dismissed

Summary

Issues:
Challenge to order directing deposit of service tax, interest, and penalties for non-compliance of provisions of the Central Excise Act, 1944.

Analysis:
The petitioner, a Society for educational purposes, entered into agreements for establishing schools, leading to a demand for service tax, interest, and penalties. The petitioner contended that it did not provide franchise services and was not liable for service tax. The appeal before the Commissioner, Central Excise (Appeals), sought dispensation of pre-deposit. The Commissioner found the petitioner's services as franchise services, leading to the order for depositing the service tax amount.

The petitioner argued that it provided expertise for school development, not franchise services, and the agreements did not mention franchise fees. The Commissioner observed the agreements permitted the use of the petitioner's name, logo, and moto, implying franchise services. The Court noted the collaboration fees received were akin to franchise fees, justifying the service tax liability. The Court upheld the Commissioner's decision, dismissing the petitioner's contentions.

The Court emphasized the importance of not impeding tax recovery, citing a Supreme Court case. The judgment highlighted the adverse impact of stay orders on public projects and financial institutions. Consequently, the writ petition was dismissed, requiring the petitioner to deposit the service tax, penalties, and interest within three weeks. The dismissal of the petition led to the rejection of the stay application.

In conclusion, the Court upheld the order directing the petitioner to deposit the service tax amount, penalties, and interest. The judgment emphasized the obligation to pay taxes promptly to avoid hindering public projects and financial institutions. The petitioner's arguments regarding the nature of services provided were deemed insufficient to overturn the Commissioner's decision, leading to the dismissal of the writ petition and stay application.