2014 (6) TMI 168 - AT - Service Tax

Service Tax demand - providing franchise service to its dealers under a scheme of activity known as Maruti True Value Service - dealers are provided the right to use the proprietary system and business concepts owned and developed by the petitioner from time to time - Penalty u/s 77 & 78 - Interest u/s 75 - Held that - Referring the earlier decision 2011 (1) TMI 729 - CESTAT, NEW DELHI involving the simplifier issues of the same party, wherein it was observed that, Prima facie, the applicants are rendering the franchise services, appellant directed to pre-deposit an amount of Rs. 2,00,00,000/- (Rupees Two Crore) - stay granted partly.

Summary

Issues:
1. Service tax demand confirmation for the period 01/09/04 to 31/03/11.
2. Invocation of extended period of limitation for the show cause notice dated 23/10/2009.
3. Classification of transactions as taxable 'franchisee service'.
4. Direction for pre-deposit and stay of further proceedings.

Analysis:
1. The appeal challenged an adjudication order confirming a service tax demand, interest, and penalties for the period 01/09/04 to 31/03/11. The order resulted from three show cause notices covering different periods with varying tax demands attributed to each notice.

2. The extended period of limitation was invoked for the first show cause notice dated 23/10/2009, alleging non-filing of returns or disclosure of franchise fees received. While a significant portion of the demand was beyond the normal limitation period, subsequent notices fell within the normal period.

3. The dispute centered on whether the transactions constituted taxable 'franchisee service'. The petitioner argued that the profit-sharing model with dealers made it a co-venture, not a typical franchise arrangement. The consideration received was linked to dealer profits, leading to a loss for the petitioner in cases of dealer losses.

4. Considering previous Tribunal decisions and the facts of the case, the Tribunal directed the petitioner to pre-deposit a specified amount within a deadline for stay of further proceedings. Non-compliance would result in rejection of the appeal. The order provided for waiver of pre-deposit for the balance assessed liability upon compliance.

This comprehensive analysis covers the key issues addressed in the legal judgment, detailing the arguments presented by both parties and the Tribunal's decision regarding the service tax demand, limitation period, transaction classification, and pre-deposit requirements for further proceedings.