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TMI Blog2018 (11) TMI 1382X X X X Extracts X X X X X X X X Extracts X X X X ..... llectual property service. Rather the various terms of the contract as given above indicate that the appellant has to represent the Timken (USA) to their various customers in such a way that the appellant looses its own individual identity and would perhaps be known only by the identity of Timken (USA). The services availed by the appellant are more akin to franchise services rather than intellectual property right service - the services availed by the appellant are franchise services and they need to pay service tax as applicable on the same. Time limitation - Held that:- As the assessee is working in the era of self-assessment and therefore the responsibility lies with them to classify the service availed/provided by them correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant agrees to pay to Timken (USA) compensation for license of technical information. 2. In all seven show cause notices were issued (both for extended period as well as within the normal period of limitation) during the period from 2003-2004 to 2010-2011 March, 2011 to September, 2012. Department alleged the appellant is receiving Franchisee service and they are liable to pay service tax under reverse charge mechanism. The orders-in-originals passed in respect of the said show cause notices, the learned Adjudicating Authority held that the contract agreed upon between the appellant and Timken (USA) is a franchisee contract , and the appellant is a franchisee of Timken (USA). The Adjudicating Authority has confirmed the demand of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identified with any other person For that the Technology License and Technical Assistance Agreement entered into by the appellant with Timken, USA does not fulfill above conditions in as much as the appellant is not granted the representational right to sell or manufacture goods or to provide service or undertake any process indentified with the Timken, USA and that the appellant is engaged in providing various services which are not identified with Timken, USA such as those of maintenance and repair services, erection, installation and commissioning services and technical inspection and certification services, which would clearly establish that the appellant is not a franchisee unit of Timken, USA and accordingly no service tax stands p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative who has reiterated the findings of the order-inoriginal. 8. Having hard both the sides before proceeding further to analyse the issue it will be appropriate have a look at the relevant definitions given in the Finance Act, 1994. The definition under Section 65 (47) for the Franchise Services (w.e.f. 16/05/2005) has been prescribed as under :- Franchise means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved . While the definition for the Intellectual Property Rights, as provided under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n thereof are also included under Intellectual property transferred to the appellant. Therefore, sale and marketing of the products are guided by Timken (USA) ; ˚ Timken (USA) has the authority to reject the products manufactured by the appellant ; ˚ Exports of the products and procurement of export contract are under direct control of Timken (USA). The products manufactured by the appellant are strictly to be in accordance with Timken (USA) s International quality standards. ˚ The appellant has no right to enter independently into any contract for manufacture of any material for his customers. The terms of contract shall be determined subject to satisfaction of Timken (USA). Further, upon terminatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and (iii) undertake any process identified with the franchisor. 58. A representational right would mean that a right is available with the franchisee to represent the franchisor. When the Franchisee represents the franchisor, for all practical purposes, the franchisee loses its individual identity and would be known by the identity of the franchisor. The individual identity of the franchisee is subsumed in the identity of the franchisor. In the case of a franchise, anyone dealing with the franchisee would get an impression as if he were dealing with the franchisor . We feel that above decisions squarely covers the situation as present in the case at hand and we feel that the services received by the appellant are correctly classifia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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