2017 (9) TMI 708 - AT - Service Tax

Franchisee Service - the amount received from MTIL, which is for the permission granted to MTIL to print and deliver in-flight magazine Swagat to the appellant - Held that - MTIL is paying a fixed monthly amount to the appellant for permitting the usage of the appellant s name and the magazine for generating the revenue - the scope of franchisee is very wide - As such, the amount received by the appellant from MTIL is liable to be taxed under the said tax entry. Time Limitation - Held that - the appellant is a Government of India Undertaking. As such, a rebuttable presumption is created regarding non-existence of intention to evade payment of service tax. However, in this particular case, the Revenue has produced sufficient evidence to rebut such presumption. It is seen that in spite of a notice issued under Section 77 of the Act, the appellant did not furnish the required details for quantification of tax liability - extended period of limitation upheld. Penalty - Held that - the appellants had entertained a belief regarding non-liability of service tax and accordingly had not discharged the same, in time - Section 80 can be invoked for waiver of penalty imposed on the appellant. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Service tax liability on amount received for in-flight magazine publication.

Analysis:
The case involved a dispute over the tax liability of an airline operator on the amount received from a publishing company for printing and delivering an in-flight magazine. The Revenue claimed that the publishing company acted as a representative of the airline, making the amount received taxable under the category of "Franchisee Service." The Original Authority confirmed the service tax liability and imposed penalties. The appellant contended that they were not liable for service tax as the publishing company was not providing representational services during the printing and publishing of the magazine. They also argued that the demand was partly time-barred and penalties were unjustified due to their bona fide belief in non-liability.

The Tribunal analyzed the statutory provisions related to franchise agreements and taxable services. They found that the in-flight magazine was closely associated with the airline's business and operations. The magazine, bearing the airline's logo and title, was identified with the appellant, and the publishing company received revenue from advertisers by representing the magazine to clients. The Tribunal concluded that the amount received by the appellant was taxable under the relevant provisions, upholding the Original Authority's decision on tax liability.

Regarding the limitation issue, the Tribunal noted that the appellant, being a Government of India Undertaking, had a presumption of non-intention to evade payment of service tax. However, the Revenue provided evidence to rebut this presumption, showing the appellant's failure to provide necessary details despite reminders. The Tribunal agreed with the Original Authority on the sustainability of the demand for the extended period.

In considering the penalty, the Tribunal invoked Section 80 of the Finance Act, 1994, to waive the penalty imposed on the appellant. Despite upholding the tax liability, the Tribunal found that the appellant's belief in non-liability and the circumstances warranted leniency in penalty imposition. Consequently, the Tribunal disposed of the appeals by confirming the tax liability but waiving the penalty under Section 80.

In conclusion, the Tribunal upheld the service tax liability on the amount received for the in-flight magazine publication, rejected the appellant's arguments against it, sustained the demand for the extended period, and waived the penalty under Section 80 based on the appellant's belief in non-liability.