2018 (6) TMI 711 - AT - Service Tax

Franchise Service - the Commissioner (Appeals) has relied upon the decision in the case of Fast Arithmetic Vs. ACCE, ST & EOU 2009 (5) TMI 70 - CESTAT, BANGALORE , where it was held that abacus training programme imparted by the appellant is mainly to create interest in children for mathematics and also to enhance their thinking capacity. The entire thing is done by employing methods of play so as to make the whole thing interesting. By no means, this activity can be compared with the activities undertaken by commercial coaching or training centre - Held that - Taking note of the fact that the Commissioner (Appeals) has erred in applying the decision of Fast Arithmetic without considering whether the demand under franchise service is sustainable or not, we are of the considered opinion that the matter requires to be remanded to the Commissioner (Appeals) for fresh consideration of the same. Time Limitation - Held that - Since the matter is remanded, all the issues are kept open. Appeal allowed by way of remand.

Summary

Issues:
Demand of service tax on franchise services, applicability of Notification No. 24/2004-ST, classification of services under franchise agreement, remand to Commissioner (Appeals) for fresh consideration.

Analysis:
The case involved a dispute regarding the demand of service tax on franchise services provided by the respondents who imparted coaching programs through appointed franchisees using ABACUS and Brain Gym techniques under the brand name "SIP Academy." The respondents collected various fees from their franchisees based on agreements, but were only paying service tax on licensing fees, not on other fees collected. The original authority confirmed a demand of ?32,65,685 along with interest and imposed a penalty under section 78 of the Finance Act. The Commissioner (Appeals) later set aside the entire demand, leading the department to appeal before the Tribunal.

The Revenue argued that the services were not exempted under Notification No. 24/2004-ST for recreation or vocational training institutes, and the demand for service tax on franchise services was justified. The respondents, on the other hand, contended that their coaching program fell under the exemption provided by the notification and cited a previous case to support their position.

Upon review, the Tribunal found that the Commissioner (Appeals) had erred in relying solely on a previous decision without considering the specifics of the franchise services provided by the respondents. The original authority had addressed the classification of services and confirmed the demand under franchise services. The Tribunal concluded that the matter needed to be remanded to the Commissioner (Appeals) for a fresh assessment, as the applicability of the demand under franchise services had not been adequately evaluated.

Additionally, the respondents raised a limitation argument, which was kept open for consideration upon remand. The Tribunal set aside the impugned order and allowed the appeal by remanding the case to the Commissioner (Appeals) for further review and determination.

In summary, the Tribunal directed a fresh consideration by the Commissioner (Appeals) regarding the demand of service tax on franchise services, emphasizing the need to evaluate the specific nature of the services provided under the franchise agreement. The case was remanded for a more thorough assessment, with the issue of limitation remaining open for further examination.