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TMI Blog2014 (8) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... ng those standards. Revenue has not been able to pinpoint to us either any service or any process for which ICANN is known and that process is being used or being provided by the appellants. In the absence of any such service or process we are unable to agree with the Revenue that the appellants are franchise service of ICANN. Even the agreement which permits the use of ICANN symbols clearly indicates that appellants are ICANN Accredited Registrar and nothing beyond that. Agreement between ICANN and Registry has not been produced either by Revenue or the appellant. We find that Revenue have not been able to bring on record any service or process identified with ICANN which is required to be provided by various registries accredited by ICANN. It appears that registries are also accredited like registrars. ICANN might have provided minimum standards for registries but that does not imply that registries are providing any service or process identified with ICANN. Resellers are specifically prohibited from using the name of ICANN. They only represent the appellant. In fact they are reselling the services of registrar being provided by the appellant. After selling the services o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. The appellant is also accredited by International Corporation for Assigned Names and Numbers (ICANN) for certain top level domains. The appellant is registering domain names permitted by ICANN and ICANN accredited registries. The appellant is paying fee as per agreements, fixed and variable to ICANN and various registries (who are also accredited by ICANN). 4. The first Show Cause Notice dated 4.2.2011 is issued for the period from March 2006 to November 2010 and is in respect of the foreign remittance made by the appellant during the said period to the ICANN and ICANN accredited registries. The demand is on reverse charge basis. 5. The appellant has been appointing resellers for worldwide services of registration, renewal, cancellation, deletion of domain names and has been collecting charges for the services rendered. 6. The second Show Cause Notice dated 19.10.2011 is issued for the period April 2006 to March 2011 and is on account of amounts received by the appellant during the said period from all the resellers. 7. Both the demands are confirmed in the impugned order on the reverse charge basis. Both the demands have been made under the category of franchise s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment's case revolves around clause 2.2 of the agreement. Based on the said sub-clause 2.2, the department contended that the said sub-clause permits the appellant to use the brand name of ICANN and use of such brand name results in a crucial branding advantage to the appellant which is not available to an ordinary registrar and therefore a representational right is granted. The learned advocate for the appellant contended that there is a huge difference representing ICANN and stating that the appellant is an ICANN accredited registrar. The appellant is not even allowed to use the ICANN logo in isolation. Even the website of the appellant shows the appellant's own logo and identity and shows the ICANN accredited registrar mark. It is apparent from the website that the appellant conducts business under the brand name of Public Domain Registry and does not represent itself to be ICANN. The appellant is only stating that they are accredited by ICANN, and not they are ICANN. The learned advocate submitted that the situation is similar to a company certified by ISO. It was contended that to treat the transaction as franchise, it is important that the franchiser should have gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by ICANN does not refer to franchise; (e) The invoice raised by the appellant to the customer neither contains any reference to a franchise arrangement nor to any brands or name of ICANN. 14. It was also submitted that even ICANN has issued letter confirming that the appellant is not a franchisee and no representational rights have been granted to the appellant. It was submitted that the appellant has not surrendered his own identity. It conducts business under its own brand name and does not step into the shoes of ICANN. The customer is aware it is approaching the appellant and does not identify the appellant as ICANN. 15. Following case law were also quoted in support of the contention: (a) Global Transqene Ltd vs CCE, Aurangabad; (b) New Mangalore Port Trust Ltd vs CST 2012 (26) STR 155 ( Tr -Bang); (c) Amway India Enterprises Pvt Ltd vs CCE, New Delhi -2013 (31) STR 551 ; (d) Franch Express Network (P) Ltd vs CST, Chennai -2008 (12) STR 370 (Tri-Chennai) . 16. It was contended that in view of the above, the demand of Service tax on all remittance made to ICANN is incorrect and should be dropped. 17. The other contention of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esellers of appellant outside India and therefore such services are never received in India and in terms of Import Rules the services should be received in India and since such services are not received in India, no service tax can be levied in India. It was also contended that the benefit of Cenvat Credit should be given to the appellant. Similarly if at all its activities are held as taxable then cum-duty benefit is required to be given. It was also contended that the value of services should only be restricted to yearly accreditation fees. It was submitted that even if the arrangement is franchise only accreditation fee payable to ICANN can be taxed under the franchise services. The invoices between a registry and the appellant shows the fees paid by the appellant to the registry are categorized as new registration and renewal fees. This amount to fees paid for actual goods and services and not towards franchise fees. It was also submitted that all customers of the appellant are not resellers; some of them are end users and the demand has been made for the total amount and fees from customers who are end users cannot be considered as franchisee of the appellant. It was also subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s registry operators and includes contracting with registered name holders, collecting information about such entities and submitting the same for entry in the registry database. As per clause 2.2, ICANN grants to registrar (appellant), a non-exclusive, worldwide royalty-free licence - (a) to state that it is accredited by ICANN as a registrar for each TLD; and (b) to link to pages and documents within the ICANN website. As per clause 3.1 the appellant will operate as a registrar for each TLD for which it is accredited by ICANN. Clause 3 lays down various Registrar Obligations and as per clause 3.3.6 appellant shall provide third-party bulk access to the data subject to public access for which registrar may charge an annual fee not to exceed US$ 10,000 for such bulk access. In the Logo licence Appendix it is stipulated that ICANN grants to registrar a non-exclusive worldwide right and license to use the trademarks solely in connection with the provision and marketing of registrar services; however all rights to the trademarks that may be acquired by the registrar (appellant in this case) shall inure to the benefit of and assigned to ICANN and registrar shall not assert ownership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to get domain name registration and management services of .com, .net, org, biz, .info though the parent registrar Directi Internet Solutions Pvt Ltd who in turn are duly authorized by ICANN to provide such registration and management services. 27. The learned special counsel submitted that from the three agreements, it is clear that the services received/provided by the appellant satisfied the definition of franchisee. It was also submitted that the argument that ICANN is not engaged in domain registration and hence appellant doing registration of domain names does not represent ICANN is fallacious as the domain names are assigned by ICANN and logo, or trade mark of ICANN is allowed to be used by appellant though the ownership of logo or trade mark continues with ICANN. ICANN is present in all the three types of agreements and every user of the domain name assigned to appellant knows that the owner of the domain name is ICANN. It was submitted that seeming difference is attributable to the difference between a tangible consumer product and an intangible service of registration and management of domain names. It was also submitted by the learned special counsel for the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranchise with a franchisee and includes any associates of franchisor or a person designated by franchisor to enter into franchise on his behalf the term franchisee shall be construed accordingly. 32. It would thus be seen from the above mentioned definitions that franchisee means an agreement by which the franchisee is granted representational rights to sell or manufacture goods or to provide service or undertake any process identified with franchisor. The Revenue's case is that franchisor in the present case is ICANN and the appellants are franchisee. In order to examine whether the appellants are a franchisee, we examine activities of ICANN and thereafter the agreement between ICANN and the appellants. The appellants have provided a copy of the ICANN Byelaws. Article I of the said byelaws details the Mission and Core Values of ICANN which are reproduced below: Article I: MISSION AND CORE VALUES Section 1. MISSION The mission of The Internet Corporation for Assigned Names and Numbers ( ICANN ) is to coordinate, at the overall level, the global Internet's systems of unique identifiers, and in particular to the stable and secure operation of the Internet' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. While remaining rooted in the private sector, recognizing that governments and public authorities are responsible for public policy and duly taking into account governments' or public authorities' recommendations. These core values are deliberately expressed in very general terms, so that they may provide useful and relevant guidance in the broadest possible range of circumstances. Because they are not narrowly prescriptive, the specific way in which they apply, individually and collectively, to each new situation will necessarily depend on many factors that cannot be fully anticipated or enumerated; and because they are statements of principle rather than practice, situations will inevitably arise in which perfect fidelity to all eleven core values simultaneously is not possible. Any ICANN body making a recommendation or decision shall exercise its judgment to determine which core values are most and how they apply to the specific circumstances of the case at hand, and to determine, if necessary, an appropriate and defensible balance among competing values. 33. Article II of the said byelaws details the Powers . Section 2 of the Article II details restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Term of this Agreement, Registrar agrees that it will operate as a registrar for each TLD for which it is accredited by ICANN in accordance with this Agreement. 33.3 Another sub-clause referred by the learned Special Counsel is 3.3.6, same is reproduced below: 3.3.6 In addition, Registrar shall provide third-party bulk access to the data subject to public access under sub-section 3.3.1 under the following terms and conditions: 3.3.6.1 Registrar shall make a complete electronic copy of the data available at least one time per week for download by third parties who have entered into a bulk access agreement with Registrar. 3.3.6.2 Registrar may charge an annual fee, not to exceed $$10,OOO, for such bulk access to the data. 3.3.6.3 Registrar's access agreement shall require the third party to agree not to use the data to allow, enable, or otherwise support the transmission bye -mail, telephone, or facsimile of mass, unsolicited, commercial advertising or solicitations to entities other than such third party's own existing customers. 3.3.6.4 Registrar's access agreement may require the third party to agree not to use the data to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll inure to the benefit of, and hereby assigned to, ICANN. Registrar shall not assert ownership of the Trademarks or any associated goodwill. 3. No Sublicense. Registrar shall not sublicense any of its rights under this appendix to any other person or entity (including any of Registrar's resellers) without the prior written approval of ICANN. REGISTRATION AND ENFORCEMENT 1. Registration. Registration and any other form of protection for the Trademarks shall only be obtained by ICANN in its name and at its expense. 2. Enforcement. Registrar shall promptly notify ICANN of any actual or suspected infringement of the Trademarks by third parties, including Registrar's resellers or affiliates. ICANN shall have the sole discretion to initiate and maintain any legal proceedings against such third parties; Registrar shall not take any such actions without the prior written approval of ICANN; and ICANN shall retain any and all recoveries from such actions. 3. Further Assurances. Registrar agrees to execute such other documents and to take all such actions as ICANN may request to effect the terms of this appendix, including providing such materials ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants are only accredited by ICANN and they are not representing ICANN. 37. Coming to the second agreement. That agreement is between the Registry and Registrar, the learned Special Counsel referred to Clause 1.8, 2.5, 3.1 , 4 and 5 of the said Agreement viz between VNDS (Registry) and appellant/register). The said clauses are reproduced below for ready reference: 1.8. The Licensed Product refers to the intellectual property required to access the Supported Protocol, and to the APIs, and software, collectively. 2.5. License. Registrar grants VNDS as Registry a non-exclusive non-transferable worldwide limited license to the data elements consisting of the Registered Name, the IP addresses of name servers, and the identity of the registering registrar for propagation of and the provision of authorized access to the TLD zone files or as otherwise required or permitted by VNDS's Registry Agreement with ICANN concerning the operation of the Registry TLD, as may be amended from time to time. 3.1. License Grant. Subject to the terms and conditions of this Agreement, VNDS hereby grants Registrar and Registrar accepts a non-exclusive, non-transferable, wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reserves the right to adjust the Registration Fees, provided that any price increase shall be made only upon six (6) months prior notice to Registrar, and provided that such adjustments are consistent with VNDS's Registry Agreement with ICANN. (c) Registrars shall provide VNDS a payment security comprised of an irrevocable letter of credit, cash deposit account or other acceptable credit terms agreed by the Parties (the Payment Security ). VNDS will invoice Registrar monthly in arrears for each month's Registration Fees. All Registration Fees are due immediately upon receipt of VNDS's invoice and shall be secured by the Payment Security. If Registrar's Payment Security is depleted, registration of domain names the Registrar will be suspended and new registrations will not be accepted until the Payment Security is replenished. 38. It has been alleged in the demand notice that the registries are associate franchisor (of ICANN) and therefore the agreement between the associate franchisor and the appellant is a franchisee agreement. It is presumed that the registries are franchisees of the ICANN. 39. We find that agreement between ICANN and Registry has n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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